You're not wrong, but if people see that China is willing to shutdown someone as big as Apple, then they'll know that everyone else (who is probably smaller) stand no chance at all. People may start re-evaluating the (economic / supply-chain) risks they're will to take at that point.
In any case, threatening to shut Apple down wouldn’t be a message that you can’t do business in China, just that everybody, no matter how big, needs to toe the line. Do that, and you won’t have any problems.
And maybe you're fine with that today. But once you've ceded that ground, what happens when they move the line?
Because they always move the line.
- Mandatory state written malware for phones and computers,
- "AI" for tracking people in public, at schools and businesses
- Prevalent speed and crosswalk cameras to enforce traffic laws that their own police force fails to write tickets for.