It's actually a pretty scary idea that google thinks it has enough power to change the governing policy of one of the biggest countries in the world.
This has not been shown to be the case. I'm sorry, but you can't have it both ways. Does Google put their foot down, or don't they? Do they give into the local laws and help oppress, or don't they? I don't see Google invading China with corporate armies, or hacking Chinese government systems, or subverting Chinese government employees here.
Well, I'm sorry, but if a company wants to operate in a country, it should abide by its laws, otherwise it's a criminal organization. It's not up to that company to change the government, it's up to the people that live in the country. There are more ways than those you mention for a company to force its wishes on a government (MS has used some).
I'm not saying I agree with what China is doing. But I also don't think it a good idea to force my ideas of freedom on them, if there's anything that causes chaos in a country it's sudden changes like that. I'd say China has been doing a pretty good job of slowly creating a more free country.
A country cannot work if they have to change their laws according to the wishes of a company.
No, but a company is made up of people, and in a democracy, those people have a say in how the country is run, along with every other citizen. Perhaps you don't live in a country with a democratic form of government, or you don't value the freedom of each voice being heard. However, in the United States, we do value these things.
I do value these things (and I do live in a democratic country) but I do not have the wisdom to say that it is better than all other forms of government, and neither do you unless you've lived in them. Basically what I'm saying is that it should be the people that change a country, not an outside company. Where's the democracy in an outside company forcing a change.
But in the end it still comes down to one question: should Google support China's repressive government, or not? If you condemn them either way, you are a hypocrite. And you'll have to make a really, really good case for "should support repression" as being "not evil".
Stop thinking so binary. Just because one is "evil" doesn't mean the other is "good". There are a lot more options than the ones you mention.