I think coz govt chooses very carefully the movies to be shown. I heard time ago that during the year around 20 foreign movies are allowed only, then based on that they have to be more selective coz movies industry is sensitive to many sectors.
Remember that linked to big hits movies is realated all the merchandising, souvenirs & stuff to sell, promotions in restaurants, toys, etc, etc.
Horror movies don't have that huge effect for merchandising, besides... in my experience chinese guys & girls are afraid to watch scary movies, there's something they call horror but when I tell them that's not scary at all and that I have something really scary then and we can watch, then they always avoid it hahaha even if I pretend I wanna lend a movie they dont want...

True they're worse than children and scare easily... The government also controls what they can and cannot see because the local people are not capable of choosing things for themselves so the government kindly does it for them.

China has no rating system for movies. so every film must be family friendly. by that i mean no sex o extreme violence. most horror movies are for adults.have lots a violence and gore. so they are not appropriat for the Chinese people who should only watch happy movies.