OP here (no affiliation with YC in anyway), posted the link because was surprised it wasn't already on HN.
I first got to know about it on WeChat actually. There was an announcement from the official WeChat account of YC China in regard to the split-up (link: https://mp.weixin.qq.com/s/SnSsli_ZGo0yI58YD-ddaw), though the announcement took a much more positive and exciting tone than its English counterpart. The announcement from YC China talked a lot about 本土化 (which is not to be confused with sinicisation (汉化))。 As someone who has moved back to China recently, I noticed that 本土化 is actually a really big thing in China and it basically means localisation on steroid to become more similar to other products/services in China in every aspect (including HR, internal operations, etc).
Anyway I'm fascinated by all the comments here, none of which discussed the cultural and sociopolitical differences between that of the west and that of China, which I believe is one of the main factors that have enabled the disintegration between YC and YC China.
The Chinese government is one thing. But "the Chinese way" is another thing. And "the Chinese way" actually underlines how the Chinese society works and how the Chinese government functions. To understand "the Chinese way", one has to try to emulate a generalisation of how a Chinese person thinks and acts in this day and age after all these revolutions and wars and pandemonium that have shaped the land and the way people interpret things and interact with one another. Without great knowledge in the modern Chinese history and a good grasp of the contemporary Chinese language and culture (from a none-bias perspective as much as possible), it's extremely difficult to form a proper mental representation of "the Chinese way". The thing is not many Chinese people are aware of this too (since they are already operating under "the Chinese way", emulating it would be like running a meta-circular interpreter - not impossible just highly difficult for an average person). Perhaps this is why people (Chinese and none-Chinese) often resort to understanding China through the lens of the media (i.e. state-sponsored or company-sponsored) and that is akin to looking at a 2d projection of a higher dimension object.