I'm not sure what the Chinese government is thinking, or whether certain parts of certain ministries and party apparatus have gotten completely out of control.
Until recently, it had seemed to me that the Chinese government was managing its censorship system with surprising success: censoring enough (combined with strategic arrests) to keep people from using the Internet to organize a successful nation-wide political opposition movement; but at the same time allowing enough space for online discourse and citizen-muckraking that people have felt freer and more empowered than ever before, which actually seemed to work in favor of the central government's legitimacy—despite being very bad news for corrupt local officials. But this month, something shifted. It's unclear whether the shift is long-lasting or just temporary madness until the PRC's 60th anniversary on October 1st.
Most of China's educated, largely apolitical, internet-connected urbanites have until now been generally willing to accept the political status quo—and with it a certain amount of censorship, thuggishness and injustice, political paranoia and occasional bizarreness—in exchange for overall social stability (compared to any other time in living Chinese memory), economic growth, plus an impressive increase in China's global power and status. But whoever is driving the latest Internet crackdown and the accompanying moralistic propaganda drive may have done substantial damage to the government's credibility.
http://www.circleid.com/posts/20090625_chinas_censorship_blowback/