According to the statement, the student tried "to force his re-acceptance to the phd-program with legal and political means".
To be honest, I'm not quite sure what to make out of the whole situation (as a Swiss, originally from the area of St. Gallen, where the school is).
I would be heavily surprised if the HSG would let itself pressure to the effects that the headline of the article insinuates. The school has a bit of a reputation in engineering circles as "useless MBA graduates factory", but being beholden to Chinese interests? That seems quite the stretch to me.