Funny thing about China right now, is that in order to run a business in China, you must have a Chinse partner working with you. To which, the Chinese have big plans for foreigners looking for cheap labor
(NSFW website! though story is very important!)
The question now is, do we still want to manufacture in china, if the Chinese government wants to force foreign companies (i.e. Motorola, Nokia, Sony, etc.) to hand over their Intellectual Property to the Chinese government?
Personally, I don't see why we should outsource goods to China when we can manufacture them here in the United States or at very least Mexico.
The chinese could very well install these programs on goods exported from China or posted in the App Store and Android Market.
Now would be a good time to bring manufacturing back to America especially with the 10.2% unemployment rate and China's intentions.
Of course, Apple won't do that. Apple would rather continue to manufacture a device that has be under lock and key so badly, people have died because someone lost the phone or some other moral implications. (Imagine if HTC or Motorola had this problem, their would be one hell of a controversy!)
But as long as Apple continues to appease the Chinese with a steady revenue from a device that despite being so popular is really becoming a social control, the status quo will prevail...more so since they sell iPhones at places like Walmart