First, just saying that something is legally possible does not mean that that's what occurred.
Second, this isn't something China-specific. The US Federal government also has enormous power to compel companies to cooperate in surveillance. Just recall when the US government ordered Lavabit to turn over its SSL keys, so that the government could intercept Snowden's emails.
Second, this isn't something China-specific. The US Federal government also has enormous power to compel companies to cooperate in surveillance. Just recall when the US government ordered Lavabit to turn over its SSL keys, so that the government could intercept Snowden's emails.