There's also the possibility that they want to show (fake) the supposed power of this system even to their own citizens to elevate the apparent reach of the government.
Say what you want about rights, but Chinese government is ruthlessly efficient about what it wants done, and it rarely loses (except for the recent trade relations fiasco)
Assuming it was a fiasco, which is not very clearly the case (if you speak about the tarrifs thing).
1. Maybe wanted criminals would change their appearance or hide their faces. Even that outcome might be a significant deterrent to committing crimes, going forward.
2. Public discontent about the system. This is unlikely to be much of a problem in China.
They have a lot more to gain (deterrence) than they do to lose.
Also, the more China gets other countries to enable the same kind of censorship and surveillance it does, too, the more it won't stand-out as a sore thumb and the less it will be called out by "principled" leaders in the future.
And for the humans in charge of the AI there is no such distinction so the AI is working as intended.
State DMVs in the US get press hits all of the time when they upgrade facial recognition systems and catch people with multiple driver licenses.
Striking fear into citizens; literally state terrorism.
I think the USA is a bit behind China and the UK in applying surveillance technology to target individuals for petty things. Sure , it's technologically viable, but it seems there's no will yet to punish the evil jay walker with the full force of law.
1) Was the man actually caught by someone acting undercover and they want to protect the agent's identity with plausable deniability
2) Does the system not actually work very well (say a 1 in 100k hit rate), but they want people to think that if they are wanted, they can't hide, so they'll either turn themselves in, or be less likely to do the (unspecified) crime in the first place
3) Is there pressure that this project is overrunning/overbudget and they need a PR win to keep those higher up in the government happy