How can we limit the China Effect?

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Your question is difficult to answer for a number of reasons. However, the effect of China is felt primarily due to the small market cap. In a handful of years, the market cap (in theory) will grow, resulting in a more stable market less susceptible to news/changes like this. Now, the price has already rebounded that means the emotional reaction has passed. The real answer would be for coin holders to not be so emotional or fearful of a potential price drop. Being a market that is as speculative as it is today, we have a number of years to go.
With that all said, once adoption grows even a major market like China placing a ban (while still have impact) will have much less effect. Example: Soft Cheese. China has banned this recently as well. While import/exporting for soft cheese has impacted this industry, the panic is not near as strong as it is a industry not speculative in nature. It impacted them, but no one is panicking that soft cheese is going to crash.