Basically, the Chinese miners don't want to increase the blocksize because they are very bandwidth-limited.

Larger blocks mean longer propagation time, during which time another pool with more bandwidth could hash and propagate their own block, causing the Chinese block to be orphaned.

If 2 miners mine a block around the same time, it's a race to see who gets to a majority of other nodes first. The more data inside a node, and the further you are out in the boondocks, the slower it travels.

Since the major miners are out in the boondocks and they don't like losing $11,000 (the proceeds from a block), they would prefer a smaller block size.

Of course, the miners could simply refuse to accept transactions. There is nothing stopping them from creating empty blocks, or ones with few transactions, which would zip around the network faster (besides the loss of transaction fees, which is at the current time, very small).

Why they don't do this is that it is a delicate power play. If they upset the market too much by doing controversial stuff such as this, the market may turn on them. Therefore, it's in their best interest to lobby for the rules in their favor rather than acting contrary to the utility of the bitcoin network.

Apart from bandwidth limitation: the Chinese miners presumably make and value their profit in traditional money, by converting mining rewards. (If nothing else, they need to pay for the mining operation somehow.) A fall of the value of Bitcoin in traditional currency, e.g. due to a lack of market confidence, impacts their profits very directly. Miners, typically, don't want to hold Bitcoin positions themselves.

So they are incentivized to be extremely risk-averse to anything that could affect the Bitcoin exchange rate, and will only be excited about code changes when not changing would be clearly worse.