With the Google news breaking this past week, does this seem like a case of bad timing?
I'm sure some would say that American companies have lost some of the moral ground in this fight. However, when confronted about this, Google at least responded, apologized, and corrected the situation within days. I can't say the Chinese government moves quite that fast or even has the incentive to change.
When you're battling economic, environments, and publicity issues on a day-to-day basis...is it really on the top of your priority list to crack down on people's entertainment? I'd be much happier knowing that people were at home watching "Sex and the City" and "Prison Break" instead of worrying about their air quality, high rent, and limited employment options.