I'm having trouble understanding what this buys even the Chinese. As far as I can tell, this proposal is the equivalent of all clients putting "search cn" (for example) in their resolv.conf; local "cn" domains will then be searched first, falling back on non-cn domains only if no .cn domain is found. The only difference is that the code to handle this "search cn" directive would be in the DNS server instead of the client.
This doesn't have any "teeth" unless they also blocked non-Chinese DNS servers. But they could do that already, even today. I just don't get why they're coming to the table trying to convince the rest of the Internet to do something, when they seem to already have the tools they need to do this themselves.
There is a worldwide political pressure around DNS filtering, redirection and manipulation. [1,2,3] The same pressure is going to come to IP as soon as DNS-poisoning workarounds will spread to more lay people.
Probably China is trying to show the way, even the technical way, on how to apply internet-wide censorship to other "freedom loving" countries. I think China may also be seeking some kind of official recognition of the fact they are not the only bad guys in town, that other countries are implementing the same measures, although with much less bad public reaction. If other countries will reference that Internet Draft in their (leaked) technical manuals or even participate in the discussion of it, China could much more easily justify its actions.
This doesn't have any "teeth" unless they also blocked non-Chinese DNS servers. But they could do that already, even today. I just don't get why they're coming to the table trying to convince the rest of the Internet to do something, when they seem to already have the tools they need to do this themselves.