But it is individuals, not governments, who mine Bitcoin. In fact, the people who mine Bitcoin don’t like governments very much, and wouldn’t cooperate with a government-imposed Sybil attack that would devalue their state-independent store of wealth, any more than they would cooperate with said government going to war with a country they’ve exported all their investments to. Such people would actively seek to use their wealth to oppose such a government.

If a government moved to confiscate all mining operations and run them itself to perform such an attack, the fight such people put up against that would be so obvious that it would be incredibly easy for parties external to the situation (Bitcoin devs + Node operators outside of China) to stop any ensuing Sybil attack. They’d just blacklist Chinese IPs from the network statically in the client code—effectively hard-forking the other 49% of the network in advance so it doesn’t later become confused.