Is not illegal to hold or trade crypto currencies and Bitcoin is viewed as a special virtual commodity. The Chinese government encourages the development of blockchain technology.
The Large Exchanges operated by China executives are OkEx based in Malta and Huobi based in Seychelles. Other exchanges relocated to other countries or changed their business model: offering Peer To Peer trading or just services for external clients.
Overseas Exchange access has been blocked and VPN services require special authorization in order to avoid bypassing the regulations put in place.
Timeline of related events
Nov. 2019: Exchanges(Bitsoda, Akdex, Idax, Btuex, Biss) close down, offering only oversee services, Cointelegraph
Apr. 2018: OkEx moves to Malta, Cointelegraph
Jan. 2018: Local governments were noticed to assist on closing mining operations
Jan. 2018: Initial Miner Offerings (IMO) was banned
Sep. 2017: Initial coin offerings (ICO) was banned, exchanges are not allowed to offer conversion services from fiat currency to virtual currencies. Exchanges should not act like a central country (CCP)