The association had earlier apologized for the melee that left Tuesday's game unfinished and one Chinese player in a neck brace.
Video footage and photos of the fighting zoomed around the Internet and worldwide TV news, tarnishing China's sporting image before next month's Asian Games in the southern city of Guangzhou.
Donewald, a former NBA assistant with the New Orleans Hornets and Cleveland Cavaliers, apologized at a news conference Friday and said players had been following his lead after he protested a foul call.
"The consequences of this event and the incident is severe," Donewald said. "Not only was it against the spirit of competition, our actions were also not worthy of the adulation of our fans and the well wishes of the entire country.
"We have brought shame and disappointment to this team, to our fans and to this nation. So on behalf of the national team, I offer our sincere apologies to everyone who supports and cares about us."
Donewald, the American who took charge of the China team six months ago, had been ejected for insulting officials shortly before the fighting started. He was suspended indefinitely, fined $7,500 and given a formal demerit.
Similar punishments were dealt to manager Zhang Xiong, who was fined $4,500, and players Ding Jinhui, Su Wei, and Zhu Fangyu, who were each fined $3,000.
The association on Wednesday said the team's preparations for the Asian Games were put on hold to give players time to "deeply reflect." All players also have been ordered to attend lessons on good sportsmanship.
Play became increasingly rough after Donewald was ejected in the opening minutes, then players started kicking and punching. The teams were separated, but China's players then attacked their opponents as the Brazilians were heading to the locker room.
Brazil refused to return to the court or play a scheduled fourth game in their series and both teams flew back to Beijing from the central city of Xuchang.
The brawl Tuesday was the latest instance of on-court fighting by China, whose players have been fined tens of thousands of dollars by the world and Asian federations for scrapping with opponents.
Star Chinese players Yao Ming of the Houston Rockets and Yi Jianlian of the Washington Wizards were not present at the game.