China doesn't care. They are banned from buying western AI HW or making their own AI HW at TSMC/Samsung. They are pouring hundreds of billions to the semiconductor ecosystem.

Huawei is trying to make establish domestic Ascend/MindSpore ecosystem, but they are limited by the SMIC process (~7nm). Amount of defects is allegedly rather high, but they are the only "official" game in town (other than smuggled NVIDIA cards or outsourced datacenters in Middle East).

Then the point about China trying to block a Nvidia merger doesn't really sense if they will be going their own path anyways. It would exist to try to harm Nvidia before their homegrown alternatives ramp up.

Nvidia is only one side of merger. The other is Intel. Intel does sell processors in China. Only AI is banned, not generic CPU (except HPC).