Keep in mind that we're talking about China. If Apple pulls out, there's no shortage of Chinese companies that the Chinese government is buddy-buddy with who will happily go all-in on spying on consumers.

Apple obeys Chinese regulations, but it's reasonable to assume (based on their actions in the US) that they don't enjoy it. Which means they're not going to go out of their way to give the Chinese government more than they need to. This is potentially in contrast with the Chinese technology companies who would be more than happy to provide extra data to the government.

Apple is able to hold their position in China only because they comply with regulations, but in so doing they provide consumers with a better option than going through any of the Chinese government-friendly companies. Yes, it sucks that they have to comply, but in a scenario where Apple either chooses or is forced to withdraw from China it is the Chinese consumers who will suffer the most, because they will be left with only government-friendly alternatives.