That’s exactly what is happening: Windows 10 "China Edition" or some moves from Apple to comply with Chinese regulations for example.

Respecting local regulations is not a mind blowing fact. A foreign company cannot sell heroin in the USA under the pretext it is legal in their country.

So you mean I can't use <insert shitty country>'s child pornography app in the US?

I know it's an extreme case, but yeah, of course countries expect people who do business in them to respect their laws.

That is the way it currently works, yes. If your foreign web service is not approved by the Chinese government, it will most likely be blocked in China.