What a weird condition they put there lol. I think they wanted China to develop similar machines using Chinese own knowledge and technology so when they lift the ban and start selling their machines again in China Chinese manufacturers will not going to steal or copy their technology or product because Chinese have mastered the technology on their own. That's their thinking I guess.
Its not weird but a classic capitalist system. Lets say China manage develop EUV, ASML will immediately sell EUV tools to China. Then chinese company will got on dilemma either buy or face fierce competition.
Why China indigenous product fail because of competition. Currently ASML EUVL is completely monopoly, practically they can put any price and condition to customer and price is very expensive. Meanwhile in the process they already get ROI back. Once competition coming in they can put price very cheaply on reason technology mature to avoid anti-dumping law.
That's why Chinese company (public or pribate) very hard to develop their own indigenous tech. Competition in China is cutthroat than any capitalist country on the world. They need survive first than develop their own tech in the process they already to late. If not central government intervention and US sanctions hard to any china company to innovation. Among Chinese company that have innovation already sanctions by US.