If they ban it completely and the demand remains, it'll disappear underground, while if the government embraces it and puts AML/KYC (and most likely cash-limits) in place, they can control (and tax) it.
Local bitcoins is already out there and if those get blocked by the great firewall of China, alternatives will pop up soon enough.
Also the ICO environment is littered with complete utter garbage and I can see lots of people getting burned when jumping in uninformed, which seems to be happening on an accelerated pace these days.
> I doubt they'll add proper regulations for hundreds of cryptocurrencies
Why do you think they have to do it in a "whack a mole" type of way?
It's not terribly difficult for one government to establish "best practices" and then ban all cryptocurrencies and/or ICOs that don't strictly adhere to it.