As someone living in China for the past 3 and a half years, I'd say you were off a bit on your post. The longer you are here, the more you can communicate, see how things happen and actually talk to people about their experiences. When I get into a cab and start talking politics, most of the cab drivers are fully aware of how corrupt and misrun some aspects of the regime are. It's not a secret how things work here- they've been this way for centuries. If you are in with the powers that be, you are living the good life. If you aren't, you don't really have time to do much else than, as you said, make sure there is food on the table. But the reality of the situation is that people are NOT afraid to talk about it! You just don't stand out in Tian An Men square with a big sign yelling about how Mao was a phony.
I've responded to a few of these 'great firewall' type articles before and I stand by what I've said; in general the government doesn't really care about one dissident here or another there, these people don't really threaten the power structure. But if there is a group attempting to gain power then they have problems. Look at Falun Gong. Basically a crazy religious cult, but banned in China because it was attracting too many people.
I've traveled to lots of places in China the way Chinese people do, by slow trains and busses. I've been to the countryside and seen and talked to people who are living a very third world life. There are lots of F'ed up situations in China and lots of people being treated unfairly. There are organized protests here everyday from farmers whose land has been taken away, etc. Chinese people in general are extremely practical. What is going online and blogging about something really going to do for you, farmer Zhang, making barely enough to feed your family. It's going to waste your time and resources in an internet cafe rather than spending that time trying to make sure your daughter has a better life.
I could say a lot more, but if you've made it this far you're probably bored anyway and I've vented enough. As anyone who has spent time abroad knows, it's impossible to fully explain what you've experienced and how things work in another system. I'm not defending the government, just hoping to expound on a few of these issues.