I'm more comfortable with the Chinese holding my data than some Western governments. The simple reason is that I do not live in China and they literally cannot do much with it.
You lack imagination. Blackmail, espionage, economic advantage are all possible if a you have the kind of data that Palantir is fairly routinely assumed to have access to.
https://techcrunch.com/2015/01/11/leaked-palantir-doc-reveal...
If you feel that in light of that the Chinese having access to such information is a no-op then I have no further counter arguments.
What you're saying is wildly short-sighted, and frankly bound in a very dangerous false dichotomy.