1. I think China want to temporarily crash the market so they can collect more BTC (and other coins dirt cheap) before announcing that they are officially adopting. At that point BTC (and other crypto) will sky rocket.
2. They don't want their citizens to trade cryptocurrency and earn (relatively easily) in fear of losing their cheap labor force. They will then try to make it as difficult as possible for it to flourish in their country.
Which is it???
What you are telling is the story which is showed to the world by the big whales of big country who have shorted the bitcoin means they are selling bitcoins from 3000+ level and when they saw it going to show much high they have to cut loss so they with the help of china banned the ICO as they know now the ICO theory is going high so when this news came they also rumoured that chine also banning the local exchanges, this made market panic and it went 40% down the price where they covered their short position and now they are long and will take time to move the market more high.