Sure, and right now Baidu is doing that for them. Baidu is likely not as good at it as Google, but Baidu is also much more likely to comply willingly. Google can drag their feet and build low quality censorship/anti-privacy tools for the Chinese government, and simply say "sorry it's the best we could do".

By abdicating that responsibility to an actor like Baidu, who is much more aligned with the Chinese government, they make the problem worse. By agreeing to their demands, and then doing the shittiest job possible of complying, they actually have a lot more power and influence.

> Edit: Do you honestly think that once the Chinese government has some leverage over Google (because they now make a portion of their revenue from the Chinese market) they wouldn't use that to get additional concessions?

Yes, but that's a two way street. Chinese citizens will come to rely on Google search, and will be unhappy when its taken away. So both sides become enmeshed.