correct and it may be easier so you can move forward to let them do it regardless. Having been to China recently I didn't experience this but I did have to take out all my devices and have them looked at. It was done in front of me and no funny business.
I doubt they have this ability. They’d effectively have to jailbreak the phone to do this (assuming Apple isn’t complicit) and it’s unlikely many locals have iOS devices.
Doesn't Graykey install a jailbreak through an exploit?