Because the compiler doesn't know that new Circle
is valid. Consider this code:
Base<? extends Shape> bs = new Base<Square>(); // Really a Base<Square>
bs.setX(new Circle());
(FYI, a very similar example is given in the Java tutorial on wildcards.)
You may now exclaim "But the compiler can see it's really a Base<Square>
!". But not in general. Consider this:
Base<? extends Shape> bs = someInterface.getBaseOfSomeKindOfShape();
bs.setX(new Circle());