If I understand your point, you're saying that this China news only had any effect on the market because mass sentiment is that Bitcoin is vulnerable and this news served to confirm that sentiment?
While that may be true in many cases, this one would have meant a mass sell off of a very large percentage of international exchange funds. In light of that fact, the drop was actually pretty minor and insignificant.
Isn't your bolded text the very essence of the myth?
Personally, I don't know how many coins are actually held by the "chinese" and I also don't know whether they would be more or less likely to sell them in a "ban" scenario.