As far as I know China not allow online gambling although I don't have source news. Since bitcoin isn't traceable if don't know who own the address perhaps China people's would use VPN. And I believe most of legit crypto-currency gambling doesn't ask for KYC. So China player can get benefits of it.
I don't think gambling is totally banned in China. Lottery especially, is kind of legal in parts of the country
https://en.m.wikipedia.org/wiki/Gambling_in_ChinaLottery is still gambling I guess.
Maybe gambling is tightly controlled over there or something.
I know that Chinese has a lot of gambling-type games so it won't be a surprised if they have bitcoin gambling games. It might be illegal but I think a lot of them are into it. The government can't totally control such situations. Underworld is always there and you can find all sorts of gambling in that area.