What can this be? It is approximately 5" high, 4.5" wide and I think purchased in China in 1920's.
This could not possibly be 1920s. The blue color tone used here gives it away as something more recent, in my view. In addition, the bottom is not right, the table cloth would never have been painted that way in traditional Chinese painting. The man is also looking in a way not common in those times.
Not sure what you mean by "tablecloth", the chinese characters are on the bottom of the pot.
This means the folds of the cloth are painted in a style that is typical of the 20th century and later. And, the Chinese characters are irrelevant because these usually are spurious.
www.chinese-antique-porcelain.com/china-marks.html