Tor encrypts between nodes, the problem is getting connected to the Tor network, you need an entry point. What the government is doing is blocking the entry poi

Tor encrypts between nodes, the problem is getting connected to the Tor network, you need an entry point. What the government is doing is blocking the entry points. Initially the public bridges, and then the bridge nodes (normal ones anyway). You need to get the ip of a bridge before you can connect, but once this becomes available(semi public information) the government also learns it and blocks the ip. There are dedicated teams here whose job is to suppress connections to Tor from inside China.