In western democracies inspections and regulations they ARE good things.
But the Chinese govt rules are extremely opaque, which is why the exchanges are nervous. Some new rule could be pulled out of someone's backside and they could be found in breach of it. There is no accountability in their system. That's why the price fell.
Regulations should be a good thing, but I don't think it's only because it's the chinese government and not other governments. As far as I know, everytime any government talks about "regulation" whatever it might be, price crashes. The other day the chinese government talked about how bitcoin as volatile, and that caused the crash itself. Every statement by governments create an opportunity for whales to try to short and get the rest following the lead by panic selling. Now whales have made a lot of money with this short and people that sold at the bottom will lose it since we are going up again.