I understand it they incorporate foreign words by matching up with Chinese characters bearing the matching syllables with some preference for preserving semantics, repetition, and an implied semantic anyway that is in the consciousness of the reader for either the native or foreign word: it must matter that a person’s name is spelled “stream creek creek” but in the end it is best kept in 中文.
If Chinese folks want to write Churchill, they might write:
A) Churchill
B) 丘吉尔
But they will never write:
C) Qiūjí'ěr (the pinyin for B)
I've never seen an adult Chinese use pinyin for anything other than typing (as an input method for Chinese characters).