In a developer interview by Famitsu, the development team stated that the reason they decided to add South American and China teams was because the popularity of KOF in those regions and (in the case of China) because Chinese players didn't know Team Psycho Soldier was technically Team China. They also confirmed that they wanted to add stereotypical Shaolin fighters into the China Team, but after taking a trip to the country, they realized everyone was super fashionable and so they added cool-looking characters instead.

This is also the reason why Nelson (from Team South America) is a cool looking character rather than a typical buff-looking boxer.