They explained that non-Chinese companies were not allowed to operate in China. What Blizzard had done was essentially a partnership, but legally they gave rights to a Chinese company to operate/use their IP in China.
I suspect this is the same here, this is a Chinese company with a right from Blizzard to use their IP, but isn’t actually Blizzard itself.
Blizzard probably can’t control what this Chinese company does in China except probably for terminating their license to use their Hearthstone IP, and even then I wouldn’t be surprised if that’s legally challenging.