The concept you're explaining is called fansubs, and this concept transcends borders outright; groups of fans will get together to translate a work that they are fans of for their language.
This radically differs from actual, licensed subtitle jobs done by bigger companies, with these key differences being present in the officially licensed subtitle jobs, but not the fansubs:
- The work is officially licensed for translation, meaning that a consumer will be directly supporting both the original creator and the team who made the translation possible;
- The translated work is done professionally and accurately, especially given the nuances found in Japanese language which may not always accurately translate to English;
- These works are often placed into stores and shops for regular retail purchase, or may be streamed in your country, depending on the license acquired.
I have very little insight into the industry, but the key similarity between the two is that the translation is done in rough, proofread, and perhaps tweaked for tone and/or localized (again, jokes or concepts may not translate well across languages).
I'd like to highlight the third key difference, which is that the work is generally made widely available to the public for legal purchase in that region. One of the major reasons that fansubs exist is due to the lack of general availability of the work, which means that in order for a region to enjoy the work, it must first be brought to that country, which may or may not have legal ramifications.
Note that I am not a lawyer, but I've read some things on fansubs and piracy before; in general, the industry isn't all that happy with it.
Distributors of fansubbed work may face repercussions due to the fact that the work may not be licensed in that country or that region, and the translators are effectively pirating the work.
I can't speak to China's anime climate, but I will state that official translations must be licensed for distribution in that country. I encourage you to find licensed work in your country and support that, as that will ensure that more licensed works come over due to it being a more viable market.