Canonical seems to be spending some big money marketing Ubuntu in China, I'm starting to some low-cost Ubuntu PCs and laptops in the stores now. I know about Ubuntu on phones and tablets. But Canonical would have to convince the manufacturers about Ubuntu, who at the moment are 100% Android.
From what I hear, I think the government's intention is not be reliant on Microsoft at all. There is a home-grown Red-Flag Linux, but it's quite ropey and now seems to be pretty much abandoned.
"However, I think it's unlikely we'll see creepy backdoors or monitoring software built into Ubuntu Kylin. First, the open source nature will mean it'd have to be done in binary form, and even that will stand out among the rest of the open source operating system. Aside form that, there's the simple fact that monitoring on the device itself is inefficient compared to monitoring the network itself."
I know a lot of home-grown Windows software has government back-doors, censoring and monitoring, as does the PRC versions things like Skype. And probably Windows itself. It seems with Ubuntu Kylin, the intention to keep it completely open source, and thus no governent spying within the OS itself. But that doesn't stop proprietary Linux apps having back-doors etc, and of course the networks are monitored and censored.
For a while now, Canonical's intention seems to be monetising Ubuntu, with the Amazon partnerships. I'm sure they would like to have their OS on every PC, phone and tablet in China, and I'd guess that would be in partnership with a Chinese on-line vendor like Taobao.