Doesn't this, in and of itself, tells you just how "multinational" Google really is?
There's no real issue with creating laws that apply to everybody here. Google is developing this thing in US. Therefore, American laws - and American cultural sensibilities - apply. If they don't want that, then they can do that development in China, by the workforce (and I mean executives in charge of the project as well as coders) that is subject to the same laws that they're working to implement.
I suspect that most of the staff who's actually developing the product are in China. The way things worked while I was at Google (which spanned the period when they pulled out, though I'd left by the time they decided to get back in) was that the bulk of development for google.cn would be done by Google China staff, and they would get some consulting support from engineers on critical serving infrastructure (eg. the webserver, the search serving stack) for parts where it needs to interface with the rest of the codebase.
The thing that's come back to bite Google now is that they have a culture of being very open internally. So for example, all the design docs, technical mailing lists, org chart, and source code repository for any work on Dragonfly is open to all Googlers. The article said that it's Googlers who do not work on Dragonfly that have been monitoring the source repository and leaked this to The Intercept; they may be American workers with American cultural sensibilities, but that doesn't mean that they're developing Dragonfly.
If this were Apple, they'd farm out all the human rights abuses to Foxconn [1], and the rest of their employees wouldn't know about it until it shows up in the press. I suspect the result of this is that anything Dragonfly-related is going to be designated HIP (High-value Intellectual Property, the category of source code where access is restricted to specific engineers) and all design discussions and mailing lists related to it will be locked down. That, IMHO, would suck for Google's culture, but I don't work there anymore so at least it doesn't affect me.
There's no real issue with creating laws that apply to everybody here. Google is developing this thing in US. Therefore, American laws - and American cultural sensibilities - apply. If they don't want that, then they can do that development in China, by the workforce (and I mean executives in charge of the project as well as coders) that is subject to the same laws that they're working to implement.