Actually according to Chinese media this crack focuses on eradicating pornography. Now, it's true you can get any DVD in China including 'subversive' movie (like '7 years' with Brad Pitt) , but they simply don't sell porn in those shops, it's a line they never crossed. Chinese people get their porn from the internet, mostly through torrents.
As for the "china does nothing" part. I think you need to understand just how poor China is. Despite media hype - this is an extremely poor country with tons of problems and the undermanned underpaid police has much more important stuff to deal with than people copying DVds