Cultural habits don't necessarily need a well defined cause and effect. The effect in such cases is that people think you are strange for not playing along.
The root of the habit in this case is Chinese medicinal beliefs. Here is a bit of a summary.
https://www.cheng-tsui.com/blog/hot-water-in-chinese-culture
"In traditional Chinese medicine (中医, zhōng yī), hot water is used to expel excess cold and humidity from the body, and it is believed to promote blood circulation. This helps detoxify the body and relax the muscles. Cold water supposedly has the opposite effect, slowing organ function and causing painful muscle contractions. Thus, hot water is often touted as the cure for everything from sore throats to stiffness to cramps to fatigue."
Of course, modern people also know that untreated water is not safe. That doesn't explain an aversion to cold bottled water or other drinks though, which while far from absolute is more common than it is in Western countries.