China isn't exactly happy with the US government right now due to the sanctions imposed over advanced chip technology, and this move could be viewed as part of a an ongoing reaction to that. So far, Micron has been the main target for retaliation. The US government already imposes its own restrictions on Chinese hardware and services. Notable, Huawei equipment is banned and TikTok can't be installed on government devices.

Already did. This is the tit-for-tat regulation. America did cause, and China did effect.