1. It feeds into the suspicion many have that many (most? all?) large Chinese companies are effectively controlled by the Chinese government. This could go as far as having backdoors in, say, Huawei routing equipment.
2. Effectively disclosing a user's personal information to the Chinese government could, in some cases, imperil their liberty, even their life. I'm talking about people the Chinese governments views as "dissidents". The same would be true if it were a Russian, North Korean, Iranian, Syrian or Sudanese company.
All is the correct answer. Just like it's not legal to own property in China, all companies are ultimately owned and controlled by the Chinese government. They have shiny, pretty, Western-looking front ends to attract foreign investment, but from a strictly legal standpoint, they're all owned by the government.
For some reason people forget that China is still a communist country. Nothing's changed other than it's gone from exporting rice to exporting phones.
https://en.wikipedia.org/wiki/Property_Law_of_the_People's_R...
It's not accurate to say China is "still a communist country." It could be more closely defined as a capitalist one-party state. That one party is the CCP, and they still revere Mao, but it's an open secret that they have embraced capitalism under a veneer of socialist populism.
That being said, it's not wrong to say that information in the hands of a Chinese company is a trivial step away from being information in the hands of the Chinese state.