I have only been to HK and Macau but never to the China mainland. Pardon my ignorance, but why does the Chinese government bother to censor the Internet? Are the people in China not happy with the progress that has occurred over the past few decades? Is the government really that concerned with their populace discussing politics or sensitive issues openly? Do Chinese provinces consider themselves to be separate and distinct or is it more like US states where the differences are superficial and the division is unimportant?
It seems to me the US doesn't have much leverage regarding this particular issue. We would be best served working harder towards more affordable and flexible manufacturing automation so we can be more self-reliant.
I think the Chinese government works more like a gang than the kind of government you are familiar with. The only politically correct thing is to maintain the ruling, and the real motivations are nothing uncommon: power and money, and most of the time the latter.
The great firewall project is a big business for a lot of people (e.g., billions dollars business if not much more). Hardware providers look for the deals. Professors in universities look for funds (for themselves and for their students). And the biggest cut would be bribes for officials and commissions for pimps. The worst part is this business is sort of under table and there is not much control.
All these people want this business to stay and grow under the name of glorious "reasons", and there is just zero motive for people to get in its way.
To add to what others said, the Chinese government is a bit obsessed with the Soviet collapse, which many in the Chinese system see as having been causes by liberalizing too quickly. Gorbachev allowed freedom of speech and the Union disintegrated soon after, and that was before we had communication force multipliers like the Internet.
It's not necessarily completely self serving; many Chinese leaders do have their people's interests at heart. (Not all do, of course.) It's easy to argue that the many of the former Soviet republics are doing much worse now than they were in 1989.
To answer your questions:
Chinese government obviously bothers and is very concerned, for many cultural and historical reasons that cannot be easily summarized.
Provinces do not have so much power. It's completely different from US. China has been a centralized country since ancient time and the communist party is really good at executing the decision of the central government.
It seems to me the US doesn't have much leverage regarding this particular issue. We would be best served working harder towards more affordable and flexible manufacturing automation so we can be more self-reliant.