Sounds like a cockup. I can't think why an INT - INT luggage transfer shouldn't have been possible at PVG. Did the CA check-in agent give any hint of a reason for justification to refuse the check through. Did you just challenge the check in agent, was their supervisor involved?

So what happened? Did you have to go landside at PVG, collect luggage and check back in again? In which case that really was the ordeal, and would have run the risk that immigration might not have wanted to admit you for such a short TWOV (but if you're German passport holder you might have visa free entry now?)