You have to realize that China is not the US, people there don't think or feel the same way we do about things, especially the government. The leadership there knows they have roughly a third of the world population and that many companies want to do business with them, and that if the government tells them no, that's it, they're out.
In Chinese culture "saving face" is a big issue. And that's exactly why the $ amount requested was so low. To allow the goverment to "save face" for allowing pirating to occur. If they felt they were being insulted for not being in control of these things, it could ruin the chances of the legitimate movies ever becoming mainstream.
Though it sounds silly and messed up from our perspective, you need to remember that regardless of what you may think is right or wrong, China is still a communist country and they are not fully concerned with our laws. That said, they still want our money. It's a delicate situation dealing with China.
The Government is fully embarrassed by the constant quality control issues that we take for granted that they've been experiencing lately. From Heparin to lead paint in childrens toys to ethyl glycol in toothpaste. The list goes on and on. Yet China is a potential gold mine for companies. So they keep doing business there. If these issues can be worked out with Government being able to save face, the studios know they can make huge profits, so they persist.
Jack