If I were to guess — since it doesn't make sense for such a 'controlling' country to be interested in a currency they can control; (this is a sort of tinfoil-hat theory so bear with me) I think it's because they might think that bitcoin is(or can be) some sort of competitor to the USD.
China do not have international dealings with other countries with bitcoin or any other cryptocurrencies and they have not shown that they have it in mind. It only recognize bitcoin as a digital property that Chinese can hold legally. The country prefer the BRICS way to compete with United States dollar, but those BRICS nation are still not able to do something that will significantly affect United States dollar.
it should be, there is no reason to reject bitcoin. Not only China, but the whole world should accept Bitcoin as legal payment.
But China did not accept bitcoin as a currency, but as something that you can hold. As China is not accepting gambling but it is one of the countries that are mostly gambling. Also in crypto, it is the second country with bitcoin mining hashrates. There are a lot that is not accepted in that country, but there citizens are doing it.
