On a practical level it won't have a major impact, because most of those who qualify for the BNO passport also have a Hong Kong passport or even a China passport, so they can use those documents to clear customs when exiting China or Hong Kong and then use the BNO passport for entry into the U.K.

China choosing not to recognize the passport simply means you will not be able to use it to travel in and out of China (and HK/Macao depending on how far they want to take this).

If you are talking about political/bilateral ramifications, I would say it fits their usual tit-for-tat pattern of escalation similar to the fight they had with the U.S. over reporters last year. It will stop when the other party either backs down or stops retaliating. Britain has basically done what they said they would do, and this move by China is largely symbolic for now so it may end here.

The next level of escalation will be if China moves to identify those who simply *have* BNO passports and then subjects them to exit bans.