Er.... what does your Return policy state? Is it within the acceptable time period or not? If it is, you have no choice but to accept a Return. If it is outside of your Return, I would thank them most kindly for their business but decline the Request. Be sympathetic. But cite your policy.
I suspect, as do you no doubt, that in reality, the buyer received this piece of China in good order, admired it for 29 days and then their grandson knocked it over on the 30th. That's his mother's problem to fix, not yours.
That being said, it is not impossible that it really happened the way the buyer said it did.
As to how USPS handles claims on China, you will have to investigate that. We're in Canada using Canada Post and our rules may be different. Although I am not a China seller, I know there are some items which are not eligible for insurance due to their fragility and dishes may be one of them.
Is this an item that you regularly sell? With breakables, padding isn't enough, you have to provide stability within the parcel.
