The element in this is: China does not have to change.
Instead of the usual way of first changing your ways and then we reward you, the Chinese get the pass of we change to adopt to them.
So for the Chinese gov't they win again. They know once again we will lower our standards to comply.
What is the incentive for the Chinese to change? None.
And what is the incentive for the Chinese government to change if Google does not agree to their terms? My hunch is that under those circumstances the Chinese government would just as soon do without Google.