The schooling thing can be an issue. Chinese public schools are now, by law, supposed to enroll foreign passport holders but not all schools do, especially in smaller places. Some public schools have special international programs too, but they tend to attract a lot of Koreans and other Asians. However, this is a problem that can often be solved with guanxi and money, at least at the primary school level. Middle and high school can be more tricky because kids have to test to get into good schools and you don't have as much control over the process.
Once your kids get older you'll probably start discussing goals and whether they will want to stay in China for college or go to your home country. You also might find that once your kids are a bit older your Chinese family themselves might start advocating for you to take/send (as is common in China -- my co-worker just sent her 13 year old son to boarding school in the States so that he would have a clear path to a university there when the time comes) the kids abroad for their education, especially if they aren't on the Beida/Qinghua/Fudan track in China. With Chinese families really, once children come into the picture, all bets are off and most families are willing to make enormous sacrifices to do what is considered best for the child.
My kids also have not technically renounced their Chinese citizenship yet. They have American passports, but they don't have hukous. We don't plan on sending them to Chinese schools (we're looking to repatriate by the time my son starts 1st grade. He's 4 and in kindergarten now) but if we did we'd have to rely on guanxi to get him into a decent primary school. I don't think it would be particularly difficult, but it might be costly. Not as costly as international school though.
The fine for having extra kids can be pretty steep. It depends on your wife's hukou. A Chinese couple who had to pay the fine explained to us that it is something like a percentage of the average income in the area where you live. I can't remember exactly what the percentage is, but basically it will be more expensive in places like Beijing or Shanghai but not that bad if you're in the sticks. HK would probably be just as expensive, maybe moreso.