> We can't know for sure from the outside, but context suggests 2 is more likely.

Can't it be .. both? And if we at least somewhat agree that this had to have consequences, why .. does it matter?

> For years American entertainment has been some of the most effective propaganda globally, now American citizens are indirectly starting to be exposed to Chinese propaganda (by avoiding content or topics) in American entertainment.

I'm not trying to be infuriating, but that seems something very American to worry about. As you write, American propaganda is huge worldwide (personally I cringe at - random examples - Independence Day speeches or Captain America). In addition, I don't quite understand how that is "propaganda" in the first place. Video games already tried to "censor" themselves before, to get around various gore acceptance level before for example. That's .. hardly propaganda. And if you build some erotic novel game that purposely avoids showing pubes and genitals to reach the Japanese market .. then I don't see censorship here either.

Now, I obviously don't deny that there IS censorship in general and around HK/TW specifically - I just feel the examples/comparisons aren't applicable?

> This is why I find this mess so fascinating

It certainly is interesting to observe, I agree.