That's a good story. If you support the status quo, that's the story you tell. But it isn't accurate.
If you have any kind of rough consensus, or even just lack of strong consensus to oppose a change, then support of the majority of miners is sufficient to make any change you want. That's the reality.
Yes, that's true. But the miners here are not changing things right now. They are sticking with the 1MB version which exists since the days of Satoshi because
Maybe. Or maybe they are just doing it because it suits their economic interests to keep blocks small, as TPTB said. I consider that quite plausible, I'm surprised you don't.
With the existing game theory? Nah.
Just because the limit will go to 2-4-8-20, doesn't mean they *have* to mine >1mb, or even >10kb. There is nothing stopping them from mining 0-tx blocks even if blocks go to 10MB tomorrow morning. Some are mining zero tx blocks right now.
Wrong. Increasing that limit allows miners elsewhere (Bitfury, KnC, 21.co, etc.) to overcome their competitive advantage, and to even drive Chinese miners off the network altogether by mining larger blocks that China can't support.
I don't understand. Let's say Chinese adopt software that SUPPORTS large blocks, but configure it in a way where it mines zero-tx blocks on purpose, or very high fee txs that are top-priority for the senders, something like <50kb in txs per block. How will others "drive them out"? With what mechanism?
By creating large blocks that take a long time to reach China.
Somehow I doubt that they can't figure a solution out (in the networking sense). You could have 4-5 nodes spread all around the world, in pretty well connected data centers, to send you everything you need in a few seconds at most - or do it through elsewhere.
If the chinese miner has a good electric bill advantage, good equipment, the ability to mine 0-tx blocks (to gain a broadcast advantage / fast propagation compared to others who transmit a few mb worth of blocks) and he only gets delayed a bit when receiving large solved blocks by others (if he is not doing network work-arounds), I think he still has the edge.