This thing started by couple of half-witted Chinese officials f**king-up and getting pulled into the BTC hype, that included the idea that BTC is competitive against the dollar. In communist regimes, it's not unusual to have officials in high position who didn't get there by their competence, but by loyalty.
It just took some time for smarter officials to join in and explain to everyone in power, that by letting the Chinese people pump BTC, will only make money flow out of China and into the pockets of westerners who own most of the coins in existence.

That is the reason why China and Russia wants nothing to do with bitcoin but the western powers don't mind.