According to the Surveying and Mapping Law of the People's Republic of China, private surveying and mapping activities are illegal in mainland China. "Since at least 2007, it has been effectively illegal for foreigners to operate a GPS device in China."
China's state media has released a string news articles about illegal mapping efforts as a threat to national security. The article also mentions news which had been announced before, that any foreigner collecting geographical data without permission will be "severely punished".
Is it because of Taiwan?
The actual answer is "national security", and just like western "national security", it seems like it's mostly theatrical. The idea (as it was explained to me, so take this with a grain of salt) is that by introducing incompatibility and a degree of inaccuracy, you can better protect against threats that would rely on extremely detailed GPS information.
In the age of highly-detailed satellite imagery I think it's kind of irrelevant.
Seems like spying paranoia/general thinking that having privately owned surveying is bad
The weird coordinate system they use there also confuses me.
Most online map services in China, including foreign map services that are available in China, use a set of obscured and transformed coordinates system, "GCJ-02", for their maps in order to comply with instructions from relevant departments. Please note that OSM do not use such kind of coordinate system and thus please do not include data manipulated into such coordinate system or use imagery that are transformed into such coordinate when mapping in OSM.