There are so many ads on the internet, including many that are viruses or ads for porn, drugs, and alcohol, that without ad blockers, many people would find it difficult, if not impossible to navigate the Internet. People in China will probably limit the use of the Internet after this.
Ad blocking definitely needs to stay, and China is awful for trying to get rid of it. The absolute most annoying thing about using the Internet is the ads that pop up when you don't want them to. This isn't even a good advertising strategy since it just makes you mad instead of making you want to use the service.
I actually came across an Asian news site that wouldn't let me read any content unless I turned off my ad blocker. I understand that websites need to make money, but I should be able to decide which website I want to support. If China wants to stop ad blocking at the state level, then that's going a step too far in my opinion but everyone will adapt and still go online.
No, seeing ads they are not able to block is not necessarily going to drive people off the Internet. While ads can be obtrusive and annoying, most of us dealt with them for years before ad-blocking technology was available. Ads do make browsing more frustrating, but that frustration in no way outweighs the usefulness of the Internet, so people will without doubt still use it.