Apparently that scene did have a factual basis (but far different than what was portrayed). It turns out the real guy (which Brad Pitt's character is loosely inspired by) was a great grappling ringer and stuntman named “Judo” Gene LeBell.
Lee was a big fan of Mohammed Ali, so it is unlikely he would have bad mouthed him on set (in real life, unlike the movie). Lee also did not start fights (and he always advised his students against that), but Lee was sparing too hard with the stuntmen on the Green Hornet and the studio wanted him to tone it down. LeBell was sent to do that, and apparently neutralized Lee quickly with a wrestling take down once on set. Lee was very impressed by the move and the two became great friends, trained together, did movie and television scenes together, and Lee incorporated wrestling moves into his form of martial arts Jeet Kune Do.
So yeah, Quintin Tarantino could have done that scene far different without making Bruce Lee look bad. That said: Screw China and their censorship. Bruce Lee was from Hong Kong (and I am pretty sure did not have a lot of love for the Communist leaders in Beijing). Given what China is doing in Hong Kong right now, the hypocrisy of this is breathtaking--even for Communists and Hollywood. I am guessing the Chinese want to make it look like they are supporting Bruce Lee's memory. But hey, Hollywood has made this bed with the ChiComs so it's sort of stuck with it.
THR: China cancels release of Tarantino's Once Upon A Time... In Hollywood
Esquire: Once Upon A Time...In Hollywood Fight Controversy
EBL: Once Upon A Time...In Hollywood: A Review