What seems to be the case is that they're shooting for slow incremental improvement, moving from less touchy areas to more touchy areas. They've gone from not talking about corruption to cracking down on it higher and higher up the ranks. It's a very slow sleigh of hand, with the distraction being economic growth, and various distinctly communist tasting programs (the current one should be 中国梦(Chinese Dream), if I recall correctly).
But their fear doesn't seem unjustified. There are still spontaneous uprisings which are usually nipped in the bud before they can escalate by means of information and communication monitoring. That's what they care about. Expats in China using VPNs? They don't give one.
Whilst I'm all for democracy, introducing it to China right now would work about as well as introducing it to the Middle East. Groups feeling under-represented would fraction off, there would likely be civil war, widespread devastation to one of the most populous countries of the world, and worst of all, whilst Iran getting nuclear weapons seems like a looming threat, China does have them. The sheer pandemonium would make Syria look like a backwater stand-off. I may be exaggerating, but then look at the bloodshed of the cultural revolution.
I grew up in Germany, so it's not like I'm opposed or unfamiliar with the idea of democracy, it's an incredible system. But for China right now? Well meant, but not practical. It'd be a less bloody affair to turn the US into a monarchy (to make a comparison). In 20 years, maybe, though it might take longer.
Thinking China can be fixed with a fair heaping of democracy and human rights ignores a lot of very significant details in a country that works contrary to a lot of accepted wisdom in the west.
/rant
PS: There's lots of interesting things going on here, playing churned lover with western ideals is literally the least interesting thing to talk about. The day before yesterday they announced changes to the Visa regimen, coming into effect in March. 72-hour visa free visit in 4 yangtze river cities, and some streamlining of visa/green card programs for tech people and entrepreneurs working in China. Maybe I should have chosen a less ironic user name, because this is starting to sound like a sales pitch.