this has been going on for some time. my reading of these moves of the chicom government is that it will result in the evolutionary emergence of a few and more reliable ACM producers. the good side of that is that ACM products will have much improved quality.
China, overall, is concentrating on more value-added products that can compete in the higher end of the world market. the bottom line is they will not kill any commercial activity that brings a significant amount of dollars into the country.
and if you're wondering how i know, have been to china a few times, a couple of which were on official government visits. although have not been there recently, knowing china and how it will behave is a central part of my day job.
of course, the chinese are inscrutable like us flips so one can never really be sure. then there's also the factor of simple greed and power struggles so for all we know the crackdown on the small factories may simply be a result of someone not getting paid enough baksheesh.
so keep your hats on, komrads, and try not to panic too much. let's hope the much vaunted chinese entrepreneurial spirit will win over the long term.

p.s.: and please remember that Japan & Korea went through the same economic sieving process in their drive toward getting world market presence.