This report about how China is cracking down on dissenters in the wake of the multi colored revolutions last year from Publius is interesting.
You might be able to see this in the context of almost all of Donald Rumsfeld’s trips to China, in which he tells the government that it needs to democratize as it economically liberalizes. The major problem here is that as economic pressures open up Chinese society, the government keeps trying to close it in order to maintain power.
Yet while this is certainly a problem, the Chinese government in general is so corrupt and so inefficient with regards to its duties that certain inequalities are surfacing that threaten to turn China completely backward.
I have heard it said by some that capitalism and democracy don’t need to exist together for either to work. They routinely point to China as the example of an authoritarian state that is doing well economically because of the liberal economic policies of the last two decades. However, the statement above might indicate that the relationship was only temporary.