I know it’s not how the xianxia genre works, but realistically? Any government should keep a wary eye on cultivators. Some amount of your empire’s or kingdom’s spy network should be devoted solely to making sure you have info on all the scary magic-users around. Who they like, who they hate, who they have friendly brawls with that level whole villages. What can they do? What won’t they do? And at any given point in time, where are they?
In short, your fantasy empire ought to put as much effort into keeping track of cultivators as they do military generals and major religious leaders. After all, a sect leader might qualify as both.
I think you can square this pretty well with the background of the jianghu, everyone having a rep and a Name. Obviously, people talk. It wouldn’t take much for an empire to station undercover scholar-officials in a few choice disreputable taverns to pick up intel. Granted, there’s a risk of sudden horrible death in a jianghu brawl, but that’s what disposable scholars who can’t get a government post are for…. Maybe worse, there’s a risk of recruitment, if you survive that brawl.
(Of course, if you survive and turn down being recruited – and survive that…. Looks like the empire lost another spy anyway, because you’re likely to be very busy. Dodging assassinations, or being dragged along on some damnfool idealistic crusade as the Scrolls Guy. Possibly both.
(…Make that definitely both.)
As for what governments do when they have this information?
Smart politicians will mostly leave the lightning-throwers alone, outside of noble appeals to defend the country from invasion, other evil magic-users, and maybe floods, droughts, and plagues depending on their skillset. Smart politicians will keep what they ask for reasonable, and in everyone’s best interest. What sect can’t use a little good PR from clearing a canal vital to trade and irrigation?
…I know what you’re thinking. When’s the last time you met a smart politician? Worse, a smart bureaucrat? Because every government has its paper-pushers, who have access to all the info politicians do; maybe more, since they’re the ones who filter “what’s really important”.
And the more petty the bureaucrat, the more viciously they defend and try to expand the power they have. If part of that power is access to info on a magic-user said mage would rather not have spread around….
Yeah. Things get messy.
But it also means things can get interesting, if a magic-using person tries to disappear. Some nobody potion-maker or guy who curses people with warts, if they try to fade out of sight, it should be easy. The sect leader who can bring down a dragon with one mighty blow? Yeah, no, people are going to notice. And be looking for him. After all, too many people tend to think, if a person is innocent then why are they hiding….
Conversely, this means that if a Dread Necromancer appears out of nowhere and starts raising a zombie army, someone’s spy network has failed. Heads should roll.
…Okay, maybe not this minute, we don’t need to give the necromancer more bodies….
Magic is showy, flashy, and fun to put in stories. People who can do it are the stuff of legends. And in a more realistic world, of gossip and espionage!
Just imagine the tension, as a sweating advisor reports to the emperor, “One of our cultivators is missing….”