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Open standards for everyone!
Obvious move is obvious.
They are attempting to create local demand for products manufactured in and by China. Instead of controlling trade using tariffs and the like and other "Velvet Glove" means of pursuasion, they have decided to use an "Iron Fist."
This is good news, actually - It potentially acts to reduce the issues surrounding China-Taiwan problems.
TSMC, the largest chipmaker on the planet, is in Taiwan. And, China doesn't actually give a crap about Taiwan, but it does give a crap about TSMC...
So, IF China was attempting to find a position that did not include war with Taiwan, a natural progression would be to build their own high-tech ultra-capacity TSMC-Knockoff.
It's not like they don't already have all of TSMC's methods, engineering, and production, infos...
Keep in mind, other nations, like Russia, have also had similar initiatives. In the US, using a much more gentle inducement, grants and Federal support for chip manufacturers to build facilities in the US are already live and working.
Of course, the extremely high-tech lithography-like equipment all these companies use isn't manufactured or owned by or within ANY of these countries:
https://en.wikipedia.org/wiki/ASML_Holding
Anyone planning on invading The Netherlands anytime soon?
https://archive.nytimes.com/www.nytimes.com/interactive/2013/09/05/us/documents-reveal-nsa-campaign-against-encryption.html
I think they would like to develop the capability to do that, yes. But, it's a very difficult thing to displace those that currently lead the industry.
So, they must first support demand in China to help fuel the development of that sector. That's the smart thing to do, IMO. I am not sure, however, a "ban" is the solution. That's not a "gradual" change for a complex industry that takes a long time to develop.
Which is why I mentioned Russia. They tried something similar and it failed, abysmally... I think China is more sophisticated than Russia in that regard, so they may have a better framework for this.
But it will not be an overnight success and its ultimate success remains to be seen. A lot can happen in the many years needed for it to become a major player in manufacturing its own chips/etc and to competitively export them to the world marketplace.
But, China has something few nations have - A government that can fully control and directly support industrial initiatives. They could act fast, but that sort of situation also usually means they're not as flexible and slow to react to changing markets that they can't directly control. (IMO)
China has done something similar, before - Solar cells.
They were able to flood the market with Chinese-manufactured solar power panels in an attempt to undercut the competitors in other countries. However, they were only able to do that because the Chinese government subsidized manufacturing and enabled the Chinese companies to sell these products below their actual manufacturing costs, which was an attempt to put any fledgeling competitors out of business "overnight."
But, once nations understood what China was doing, their products in that sector were either banned outright or had heavy tariffs imposed in order to protect their own industries. IOW - It backfired. (Plus, let's not ignore the industrial waste issues and environmental damage China allowed within its own borders in an attempt to support this action.)
They had better have a different plan for fairly competing in an open market if they wish to have a chance of long-term success.
Only braindead and losers use it now a days.