Some of the drop may already be built in to the current price of Bitcoin. However, if China really does come out with an official policy banning Bitcoin and other cryptocurrencies, it will most likely still have an affect. China is such a huge market that you would expect any negative news from them to affect the price.

I still think that even if there is a ban, Chinese citizens will continue to find ways to hold and invest in Bitcoins and maybe even mine it. And I also would not be surprised if the Chinese government invests in Bitcoin and still mined Bitcoins for their own profit.