Impossible to you maybe,
If I am China all I have to do is request every Chinese Exchange report their BTC Address & every Chinese person ,
these addresses are then placed in a database that is checked whenever a transaction is attempted, if your address is in the list it is approved because it is in the approved list, if it is not in the list , then it can be denied .
They could even charge a monthly fee to be in the approved list.
If you know anything about how computers work , you know this is not a complicated task whatsoever.
If I am China all I have to do is request every Chinese Exchange report their BTC Address & every Chinese person ,
these addresses are then placed in a database that is checked whenever a transaction is attempted, if your address is in the list it is approved because it is in the approved list, if it is not in the list , then it can be denied .
They could even charge a monthly fee to be in the approved list.
If you know anything about how computers work , you know this is not a complicated task whatsoever.
Yes, I do know that describing fantasy scenarios is not a complicated task whatsoever. Implementing them in a functional and practical manner is, though. The sheer scale of the operation as you've described it is phenomenal. It's like publishing a global phone book where the phone numbers change every minute. If you know anything about how computers work, you're crazy if you think that's as easy to physically make and maintain as it is for you to imagine it. And again, we'd see it coming a mile off and fork the network before they had a chance to implement it. They can block or charge more fees for whatever transactions they like because there wouldn't be any. The rest of the world would quite happily leave them to mine an empty chain that none of us would be transacting on.
iamnotback also sees the flaws in BTC, I suggest the rest of you research it , and make up your own minds. 
Yes, we're all quite familiar with chicken little, his multiple accounts and his perpetual prognostications of the end of days. Apparently there isn't a day goes by where the world isn't ending. I can assure you my mind is already made up.