News of this is everywhere. The link above points to a ZDNet UK article, which I felt was one of the more balanced.
It seems China is tired of having to use English characters to access the web and so has created domains accessable by using Chinese characters.
There are a lot of nations whose people feel the same way. They want to access the net using their own language and characters. There is more to the argument than that, to be sure, but that appears to be the crux of it. In addition, nations such as China resent the control the US government has over ICANN, and ultimately over the net itself.
Much remains to be seen about China's action. This is definitely a story to watch, though.