Not sure if this strategy has been posted but I found a really easy method.
The AI is programed to shoot projectiles right when you do so take advantage of this. I beat this stage just after 3 tries.
Here's how:
As soon as u begin, jump back and gain at least 3/4 of the screen distance from shao khan. Shoot ur gun (back forward 1)
One of 2 things will happen
1- he will shoot is arrow which in most cases he does, but ur gun fire will be fast enough to hit him and his arrow won't come out. Keep spamming ur gun shots.
2- he will throw his hammer, again, ur gun will be too fast for him and will hit, while still in ur shooting animation, hold up and after u hit him u will safely jump over his hammer.
Simple as that, just repeat. Guarantee that u will win.
Also, don't try and do ur x-ray move. When ur meter fills up, do ur EX gun shots instead for more damage.
And that's about it! I will try and upload a video if I can.
