This is important, because bitcoin is a bigger threat to a weakening fiat currency than to a strengthening one. China is still a long ways to go before their monetary and fiscal policy isn't as loose as a 13 year old Thai prostitute's vagina, but they are "tightening" and the U.S. is still "loosening." China's CB is also buying massive quantities of gold, and they encourage their citizens to purchase gold. So in some ways, Bitcoin is less of a threat to them and more of a threat to the dollar. They may not mind it so much since it may hurt their "enemy" more than it hurts them.
+1. My thinking exactly.
This can develop to a WIN-WIN-WIN situation:
1. Chinese government, which is already flooded with US toilet papers and recently made angry voice over the debt ceiling and threat of default, sees promoting Bitcoin as a way to strengthen their national wealth and undermine dollar hegemony.
2. US dollar, while may suffer short to mid term due to BTC competition, can be a beneficiary in the long term because this forces the US government to clean up their act and rein in the printing press. Besides, I really don't see US government has the constitution power to ban a network protocol, if so, the founding fathers would be rolling in their graves.
3. The people, of course, get to use people's money.
This may be a little bit over-optimistic but definitely a possibility.