Please take this article with a pinch of salt. I was working in Shanghai in 2008 and spent a few years out there. We had a server room, leased lines, an ICP license. Yes, the internet there was filtered and monitored, but that was all done at the ISP level or beyond. I've never heard of any situation where the government installed a monitoring device attached to a server. I really doubt that's what happened, and it sounds like the person quoted in the article doesn't work in IT. Most likely they had a managed leased line and the telecoms provider was being proactive about the service. That's not uncommon.
I heard a lot of speculation and fears from colleagues who came over. I had our HR manager tell me how she knew her blackberry was getting monitored because she could hear it getting tapped. Seriously, your mobile doesn't get routed through an analogue exchange with a tape recorder attached. There's a lot of misunderstanding and mistruths that get spread around. That's not to say censorship doesn't happen. A number of people I know had blog posts removed because of sensitive keywords - that actually seemed to be regarded as pretty normal, and they weren't worried about being dragged away for a 'cup of tea' with the authorities. The reality is generally a lot more normal that you'd imagine though.
In terms of what happened to the CEO's mail account, I think it's much more likely that their machine was compromised with malware. Malware is rife in China, mostly as there's still a huge amount of software piracy. I've seen plenty of download sites in China with files riddled with trojans. Given that their personal email was also broken into, it does sound like their machine was compromised rather than line monitoring. The device attached to the server? I don't buy it...