And what exactly is the point of lifting sanctions imposed by the west also?

Makes imports way cheaper and exports more competitive. Western sanctions don't just cut off trade between a country and the west. They limit trade with the entire world. The mechanisms for bypassing sanctions tend to be more expensive (with lower volumes to boot) than just being on western financial networks to begin with. Although obviously, the best case scenario is to create truly open financial networks that cannot be sanctioned to begin with.

They should rather look into simply boosting their trade with China and Russia

The question of managing trade gets very complex, but it cannot be wise to only trade with a select few countries. Splitting the world into cold war style blocs would be a mistake, and not what multi-polarity aims for. Diversified trade with the global majority should be on the table. Although in reality, the Iranians should focus on internal circulation as much as possible due to their precarious geopolitical situation.

Don't really get the frozen assets in this context either, not sure what they're made up of, although I guess China would accept them whatever they are.

https://en.wikipedia.org/wiki/Iranian_frozen_assets

According to wikipedia, Iran has $100-120 billion in frozen assets. Although the wikipedia article is quite slimy here. If you go to the reuters article used a source for the statement that $20 billion of Iran's assets are frozen in China and $6 billion in Iraq, you will see that the reuters article claims

1. Iran's foreign minister said that the Chinese assets aren't frozen. There just ... there. To be used whenever ig.
2. The "frozen assets" in Iraq are actually a oil/gas bill that Iraq has been slow to pay due to US sanctions and economic troubles

Other frozen assets are things like South Korea not paying its gas/oil to Iran because the US blocked them. Or a skyscraper that the Iranian government owned which got seized. Or pre-revolution Iran buying weapons that did not arrive or be refunded (because they had a revolution before the weapons arrived).