Surprising news indeed. This is the last thing I expected to read about today. :)

It's almost certain that China will try to put malicious features into this derivative of Ubuntu (and make those proprietary, of course ... how else will they keep their spyware and malware from being exposed?). After all, the "benevolant" Chinese state cares little for matters of freedom ... they chose a GNU/Linux based distro for its practical benefits: it doesn't need to be paid for/licensed, and they don't have to deal with copyright.

Shuttleworth should definitely be strident: he should support the Chinese in adopting his OS, but criticize them if/when they violate users' rights with their modifications.

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