$1.6B is nothing to Apple. They had $80B in cash at the end of September and could very well pass $100B after the holidays.
I don't think there's any way Apple will dilute the brand of one of their flagship products in their hottest market. Plus, it works both ways: they would have to find a trademark that works everywhere else so that competitors don't snatch up the new trademark in other countries.
Having the money and it being nothing are different.
If I need to I could come up with $10,000 for something. That doesn't mean that it's not significant and it doesn't mean that it's the right thing to do if I have an alternative.
If I were Apple I'd come up with a name unique to the Chinese market.