The law of unitended consequences. Sure they want the local teachers to get jobs, but the parents know that there is something missing. If you can't communicate with outsiders, what was the learning of the language for? Sure most for the Gao Kao, but some parents have plans on sending junior overseas. Having all your lessons with Chinese teachers has its pitfalls. I know one Chinese teacher who always brags to me about how he is teaching students oral English. Problem is he makes alot mistakes.
In the U.S.A. they put up all these anti-immigrant laws, mostly against Mexicans, to have local people get those jobs. If you have been getting welfare checks and unemployment money, why would you want to pick vegetables? So areas in states like Gerogia are picking and choosing what laws too enforce.
The same in China as local areas vary. There will be work for foreign teachers somewhere, somehow. In the small town I work at, I was the only foreign teacher here two years ago. Next year we will have six foreign teachers.