As much as China tries to corral bitcoin and ethereum, et al, China through its citizens still is number 3 or 4 in terms of ownership. Chinese mining pools control as much as 70% of the Bitcoin hashrate.
When governments actively devalue their currencies (such as China), anyone with savings in the native currency (such as the Yuan), see the buying power of their savings go down the drain. So, what is a person to do? They figure out how to get their money out of the Yuan, and into something else, like Gold, or other crisis currencies such as Bitcoin.
The beauty of a borderless currency, which no country has sovereignty over, is that anyone who wants to own it, and is able to own it, can. Also, the value of Bitcoin can’t be inflated away. When your currency’s value is headed to zero, you will find a way, government restrictions or not, to get it out. At least the smart ones will.
When Argentina had it’s currency crisis there was a flight to US Dollars. Venezuela, despite being banned from mining BTC still finds ways of mining it.
It’s either that or leave the country. Their own currency is worthless, and paying with gold is implausible.
Actually, I don’t think China will offer it’s own “China coin.” Like you say, a cryptocoin that is controlled by a single entity such as a nation state — is not a crypto at all. It would just be another Yuan. And while its usage stagnates, borderless currencies such as BTC will rise in value in comparison.
Rather, I see China backing a native born crypto, such as TRX or NEO or BNB instead of a BTC or Ethereum. I think they understand that a borderless crypto will win out, but better their own than someone else’s.