Ferrari, who last won a grand prix in 2024, were Mercedes' closest rivals in the Australian season-opener last weekend with Charles Leclerc third and Hamilton fourth behind the one-two of George Russell and Kimi Antonelli.
"For me, the prevailing feeling is now we have a fight on our hands with Ferrari," said Mercedes team boss Toto Wolff after Melbourne.
Mercedes will still be the team to beat, with Russell again the hot favourite, but after the worst season of his stellar career - without even a grand prix podium in 2025 - seven-times world champion Hamilton is sounding more optimistic ahead of round two.
Could a first Hamilton podium for Ferrari be on the cards?
Read the colour of good fortune
The team have a loyal following in China, where the colour red symbolises happiness and good fortune, and Hamilton is also the most successful driver there with six wins from previous stints at McLaren and Mercedes.
That only went so far last year, with Hamilton winning on Saturday before both cars were disqualified on Sunday.
"Of course, we're not as fast as Mercedes, we've got work to do, but we're right in the fight," said Hamilton after last Sunday's race in Melbourne. "I do believe we can close the gap."
Leclerc said he had been positively surprised with the race pace in Melbourne but Shanghai, the first sprint weekend of the sport's new engine and chassis revolution, represented another big challenge.
"I think it’s going to be super crucial to be straight on top of everything, which will be extremely difficult," said the Monegasque.
"To have a Sprint race so early on in a season like this will be a huge challenge for everybody."
The sprint format means only one hour-long Friday practice session, at a time when every lap counts for teams getting to grips with their new cars, but also more points on offer with eight for the Saturday winner.
The Australian Grand Prix had 120 overtakes compared to 45 a year earlier, with the lead changing hands repeatedly early on as Russell and Leclerc charged and deployed energy from the increased electrical component.
The Shanghai circuit has two long straights and Russell, leading the championship for the first time but with the jury still out on Formula 1's new way of racing, suggested China would be very different.
"You’ve got one big, long straight, so the majority of drivers will be using their energy on that one straight," he said. "You don’t need to divide it up between four like...in Melbourne."
Ferrari boss Fred Vasseur agreed: "Conditions will be probably much colder in China. And we'll have the Sprint format - it means much less time to adapt the strategy. It will be a completely different exercise."
McLaren looked the third fastest team in Australia with champion Lando Norris, after teammate Oscar Piastri crashed before the start.
Piastri won the main race from pole in China last year, with Norris second for the second year in a row.
Red Bull, who had only four-times world champion Max Verstappen finish last Sunday after Isack Hadjar retired during the race, also hope for better.
Aston Martin face a far tougher weekend after struggling with powertrain problems and unable to do many laps. The chances of them even finishing in Shanghai look remote.
"That will be optimistic but we can try," said Fernando Alonso, a two times winner in Shanghai.