China knows the benefits of allowing competition to spur innovation. The Chinese are competitive enough to allow Tesla and German models into their market - provided they don't indulge in politics or NSA back-door spyware shenanigans like Cisco and Google.
Chinese brands NIO, BYD, etc are eating Japanese and Korean lunch. BYD EV is going for 5k usd in China.
Tesla is eating German and GM lunch. Mercedes, VW, Cadillac, etc cannot beat Tesla innovation pace. Already their battery and self-driving tech is years behind Tesla.
China interest is to keep US entangled in their market and supply chain. They could choke Tesla or Walmart anytime but won't.