Having a degree can, at times, even be a hindrance for some teachers, me for example. After spending five years doing essays on Shakespeare and such delightful stuff, which was completely useless when it came to teaching children in China, I would say, without meaning to insult anyone, that it is possible that, for some of the positions in China, people with a Uni degree can be just plain over-qualified (Yes, I hate that word too. Sounds narcissistic in every way) which basically would mean that they would find the job uninspiring and boring which, sadly, would probably lead to a lack in effort on their part. However, I would argue that a certain amount of education beyond the level of high school is, more often than not, something to look for in a teacher.
China is, from what I gather, generally trying to change their attitude towards FT's, probably in an attempt to escape from the mentality that just because you are a native speaker you can teach English. Those boys from Deliverance, Cletus the Slack-jawed Yokel and Newfies are all native speakers, albeit the first is fictional and the second is both fictional and animated.
All in all, I would say that a degree does not necessarily make you a better teacher, however, I would argue that anyone who has taken a degree in something or has been employed in a field which required sharpening the analytical skills, learning to impart, explain and clarify information would probably make a better teacher than someone who decided to suddenly quit his/her McJob and move to China.
It is true that obtaining a degree can be quite expensive, unless you live in a tuition-free country but then again, lots of things are expensive. I would like to continue my studies and write a PhD on the figure of the criminal and crime and punishment in English popular culture and society between 1700-1900. In that way I could get my dream job. Such studies cost money. If I can't find the money, no PhD for me. I will just have to find something else to do.
Obviously the Chinese educational system has far worse glitches to iron out than the question of FT's holding degrees.
Anyway, that's just my two cents worth. And, to just assure everyone, I am not an elitist degree holder. I just happen to live in a country where most people obtain one as it is covered by taxes and you even get a monthly subsidy from the government while you study.