One reason why China and even institutions around the world are not interested in crypto is because of the lack of regulations. The government is taking too long to establish a clear regulation while the government agencies are having a turf war on which of them will regulate crypto.
But the metaverse itself is not something regulate since this is not a token but a virtual space for all to connect.
Why do you think so? In China, even your health passport turns red (and bans you from all travel) if the government suspects you of going to a protest rally or the like. Why do you think that the Chinese version of the metaverse will be freer? With its actions in relation to cryptocurrencies, China has already shown that China and any decentralization and freedom are incompatible. Any Chinese product is censored garbage that can be used against you at any time. I will never use Chinese Metaverses or any other Web 3.0 products.