I think it started like this, but it no longer is the case.
I feel like Huawei missed a gigantic opportunity there: forking AOSP may have gotten them traction. I would totally buy a Huawei device if it could run GrapheneOS, and I wouldn't mind if GrapheneOS was based on Huawei's fork rather than Google's.
Why would China allow the domestic sale of a device that could run GrapheneOS?
Historically, some very large Android OEMs based in China and selling in China also provided bootloader unlocking support in their devices including Xiaomi https://github.com/zenfyrdev/bootloader-unlock-wall-of-shame... and Oppo https://github.com/zenfyrdev/bootloader-unlock-wall-of-shame...
It doesn't have anything directly to do with GrapheneOS, and would have enabled custom OS support of any Android distribution.
Xiaomi claims to provide unlocking, but doesn't actually. I don't know about Oppo.
Why not?
Because it's a totalitarian state that does not tolerate dissent? It's the same reason North Korea requires all devices to be bootloader locked to RedStarOS, but weaker.
So you're saying that running AOSP is fine, but running GrapheneOS is not? Huawei used to run Android, I don't think it was blocked...
I don't think they allow AOSP (which is not Android) either.
Well whatever you call it, when you run something that looks like Android, it has AOSP inside.