Is this a scam? What should I do next?

It is definitely a scam.

If you lost an iPhone – or had one stolen from you – recently, this is the sort of "phishing" message you would get from criminals. Their goal in getting you to remove your lost/stolen phone from the list of devices associated with your Apple ID would be to clear Activation Lock, so they could "make your phone their own."

If this is what happened to you, and you followed the directions, you have done exactly what the criminals wanted. They will now be able to reset your phone to "make it their own" and have a perfectly usable device that they can set up for themselves, or sell to others.

LasoH wrote:

So don’t do anything? I lost my phone last month and I filed an insurance claim and got a message from apple saying my lost phone was received. And then I got this message today. Not sure what I should do next.

There's absolutely nothing you can do now. You removed the phone and that gave ownership of the phone to the thieves who have the phone. It's too late to reverse this and you'll never see the phone again. It was a total scam and you unfortunately did what the thieves needed you to do to make the phone theirs.

I’m gonna go ahead and say that is a scam attempt. Do not interact and delete it. That is not from Apple.

Please review: Recognize and avoid social engineering schemes including phishing messages, phony support calls, and other scams - Apple Support

Unfortunately, you can not undo that.

......I filed an insurance claim and got a message from apple saying my lost phone was received.....

The message was not from Apple. You know this because Apple does not get involved with lost or stolen phones.

LasoH wrote:

So don’t do anything? I lost my phone last month and I filed an insurance claim and got a message from apple saying my lost phone was received. And then I got this message today. Not sure what I should do next.

The message you received supposedly from Apple saying your iPhone was found was rather not from them. Apple does not assist in lost or stolen devices. That is the thief who found your iPhone and is trying to get you remove Find My off of it, which will disable Activation Lock, making your iPhone fully usable to them. Since you complied with the thief, your iPhone will never be seen again by you and will now be used by them.

LasoH wrote:

So don’t do anything? I lost my phone last month and I filed an insurance claim and got a message from apple saying my lost phone was received. And then I got this message today. Not sure what I should do next.

Probably about the only thing you can do is to report the theft to the police, and to your carrier. You could ask your carrier to blacklist the phone – so that no carrier who honors the blacklist will ever provide service to that phone again.

The Chinese location you are seeing for the iPhone may be be that of an infamous "reprocessing" plant where many stolen iPhones wind up. Apple recently extended Activation Lock to iPhone parts as a way of helping to deter the trade in stolen iPhone parts. Unfortunately, if you fell for the "phishing" message, you have cleared Activation Lock on your iPhone's parts, as well as on your iPhone as a whole.

applepay.Itq@icloud.com is not an Apple address.

So, the message did not come from Apple. Ignore and delete the message.

Hello~ Only posting to underscore the post by *Servant of Cats* which is on point. You were scammed into releasing that iPhone to the criminals that are free to use it now.

~Katana-San~

You delete and ignore the message. It's not from Apple.

So this was a phone you lost? Then you not only lost the phone, but you just released it so the scammer could erase it as new.