The Chinese policy of Internet censorship is understandable in the context of recent history. Since the Maoist revolution, Zhong Guo has striven to progress with one mind. The nail that sticks up gets hammered down. Limited freedom of speech proved very destabilising for the entire country in the Tienanmen manifestation. Since then, the authoritarian government has maintained its mandate under heaven by providing blistering economic growth and prosperity to the cities. Internet access there has grown very quickly also as an essential component of communication and economic development. Of course the potentially disruptive force of freedom of expression that the Internet inherently allows has proven frustrating and worthy in the eyes of the party of systematic suppression. For determined and intelligent internauts, expression is always possible through encryption and proxying, but is certainly more difficult with the incredible resources of the Chinese security authorities and the audience is significantly smaller. What Zhong Guo will ultimately have to prepare for is a completely free and open Internet made possible through coming technologies. By 2020, we should expect to receive satellite Internet in a simple wristwatch and I seriously doubt the Chinese military will start using their new anti-satellite system to shoot down every internet satellite out of the sky. The democratising effect of the Internet is inevitable. China's policymakers who overall have done very well in the past two decades must prepare for this inevitability and focus on the future rather than holding on too tightly to the oppressive past.
*Update* I somehow missed this Economist article on censorship and circumvention.