Let's not all freak out just yet. People will find ways around this, including the VPNs and TOR. If those are blocked, I'm sure a lot of bitcoin users will simply move if they have to and still value bitcoin. I'm not entirely sure why China is cracking down on bitcoin so hard- anyone?
As far as I know, China is trying to control its capital outflows. Around 10% of Bitcoin trading happens in China, so I can imagine it being one of the larger factors for outflows.
China is absolutely trying to control its capital outflows. But BTC is a
tiny needle in the haystack of shadow banking. Just look at the market cap vs. Chinese foreign real estate investment. It's not even on the radar. The best way to move CNY out of the country is for Western banks in China/Hong Kong to claim massive assets and incomes, which are used to obtain loans in the West to buy real estate.
BTC isn't even well-suited to capital flight, currently. It's too hard to deal with Western legacy banks, who will quickly shut your accounts down for dealing in volume with cryptocurrency exchanges. The OTC market is not nearly liquid enough to serve the needs of Chinese foreign investment.