Usually, they only censor the explicit content. But this is the first time that AI tools were used to directly alter the content of the original film.
By the way, the film has been withdrawn from a wide release in China after receiving too many complaints.
This is a much better article. It at least satisfies the questions I had about whether it was real or not.
I do still think you are misattributing the blame for this to the government as opposed to a poor decision by whoever was in charge of the localisation for this, which would be whoever the team leader is of the team handling this at the import company.