It's really unfortunate that abiding by local laws and regulations is considered unethical. But even if we assume that there is no legal way for a company to operate ethically in China, is the world meant to close our borders to them entirely? 20% of the planet lives there and we do business with China every day when we buy something manufactured there, but do not feel morally required to boycott them on account of t…
Anyways I think the best answer for society to the general question of "if there's no legal way for a company to operate ethically, should it not?" is a resounding yes. However game theory will ensure that in absence of external pressure (via regulation or public sentiment), companies will try to serve the market for profit.