I will answer your questions in bold. The industry will first react negatively, because a significant drop in the hash rate, might compromise the security in Bitcoin. Most people think the majority of mining are done in China, so they will fear the worst.

The reality is that loads of people have huge mining operations in many other countries and this will provide for enough hash rate to secure the network. Also, a massive drop in the hash rate will cause a drop in the difficulty and this will enable miners that left the mining scene, to start their old mining operations again, which will increase the hash rate again.