This service even has different terms of service, than the standard iCloud offering (though I haven't done a diff to see what's changed).
The effect of this is that the encryption keys for the service for Chinese users, are in the hands of a state-owned company (not Apple).
I'm a big support of Apple's approach and ethics with respect to privacy generally, however if you're in China, or a citizen of China, then it's probably safe to assume that anything on or passing through iCloud, is fully accessible to the state, without requiring Apple's involvement (e.g. via subpoena).