Yeah, like these other guys are saying, sight it in at a longer distance. That sight is sitting high on that pistol, so if you sight it in at a short distance and then move back, it probably will group real high. If it is due to quality however, none of this is going to help. In that case, send it back.
The problem is that it being such a short range pistol and that sight being as high as it is, you may have to pick some distance that you intend on shooting at the most and stick with that as your POA/POI distance. Your POA/POI, the dot you see, and the bore axis form a triangle and those angles dicatate the "tolerance" if you will, of the vertical grouping at different distances. Now you can adjust for different distances either in your mind, or write down and figure out the clicks needed and adjust that way. But it being a cheap sight, you may not want to make a lot of adjustments or regular adjustments like you would with a good one.
Now if you can zero it for a long distance, do it for as long a distance as you can without there being too much drop. I don't know it off the top of my head, but if you can zero it for 50 yards, great. Just make sure you have a good stable rest to do this; seated using sandbags works well for me when sighting in.
Even if you do this, due to the height of the sight, you may still group a little low at close distances, but you won't have to make a lot of adjustments or mess with it much.
Oh yeah, if you have access to a good boresight, that can help too, since you can essentially do it at night and zero the dot to the bore axis at a distance beyond the ballistical capability of the bullet (depending on the boresight... the one I have in mind is the army issue one).