That depends on how the destruction is done. A good comparison is between China's destruction of Fengyun 1C in 2007 and the US' destruction of USA-193 in 2008. The former was done at a higher altitude than the latter. The former created 3425 catalogued(*) pieces of debris, some of which will remain in orbit for decades, whereas the latter created 174 catalogued(*) pieces of debris, none of which remained in orbit two years later.
Tiangong-1 is at a lower altitude than Fengyun 1C (perhaps obvious, since it's about to deorbit), so it's not out of the question for China to destroy it in a way that doesn't make a permanent mess. I'm not advocating that, I don't know whether that's a good idea, I don't know if China has the capability to do that, I'm just disputing your blanket assertion that it's an "absolutely terrible idea".
(*) I mean catalogued by the US military and made available unclassified. It's worth noting that the US military usually keeps orbital data about classified satellites classified. It seems to have made an exception for the debris of USA-193, perhaps for good public relations in discussions such as this one.