n a street in the middle of Shanghai, I wandered into a towering ’20s edifice to admire its interior. Inside was a scene that would shock those who had been here just five years ago. The ground floor of the building had been converted into a stock brokerage, and hundreds of ordinary Chinese were furiously wagering on the local bourse.

But this scene, similar to everyday life in financial capitals like New York or Tokyo, is hardly reflective of the freedoms enjoyed by individuals in China. In recent years, multinational businesses have flocked to China’s urban areas, the country has entered the World Trade Organization, and Beijing has hired foreign PR specialists to repackage the country’s image in advance of the 2008 Olympics. But alongside economic liberalization, human rights have actually deteriorated. Religious revivals, labor protests and Internet chat rooms—indeed, anything the government perceives as a threat to authority—all have triggered a wave of often brutal crackdowns.

On the surface, China does seem to be a rapidly changing place, especially to foreigners who spend their time in prospering eastern cities like Shanghai. Home to less than one-fifth of China’s population, these cities contain the vast majority of the country’s Starbucks, mobile-phone kiosks and stock exchanges. They do seem full of young Chinese pushing against social boundaries. “There is definitely a public image of eastern China that could be very appealing, especially to foreign businesspeople who don’t dig deeper,” says Mike Jendryzcek of Human Rights Watch in Washington.

Thirteen years after the Tiananmen Square uprising, the world’s attention has shifted away from abuses in China. Many former dissidents have returned, unwilling to speak of their past; one of 1989’s leading protesters, Ya-Qin Zhang, now heads up Microsoft’s research center in China. Over the past decade, China’s secret police have broken up the networks of dissenters who provided information to the West, and today the best source of intelligence on human rights in China is one man, Frank Lu Siqing, who runs a monitoring organization out of his tiny Hong Kong apartment.

The current group of Chinese leaders, human rights experts say, is less tolerant than the previous generation headed by Deng Xiaoping and, for a time, Zhao Ziyang, a reformer placed under house arrest after the 1989 Tiananmen massacres. (Zhao remains incarcerated for fear he might emerge as a rallying point for reformers.) According to He Qinglian, a prominent Chinese journalist, this current generation of leaders, led by President Jiang Zemin, cut their political teeth in 1989, when they were surprised by how quickly protests coalesced into a nationwide anti-government movement. As a result, Jiang and his cohorts have developed an almost irrational fear of groups that aspire to create a national membership. Not surprisingly, Jiang has allowed the People’s Liberation Army, China’s ultimate weapon against protests, to exert more influence over domestic affairs. Jiang also has increased the size of the paramilitary People’s Armed Police.

In fact, some experts doubt whether the next generation of Communist Party leaders will come to the fore. As Jiang prepares to visit the United States in October, speculation is running high in Beijing that the 76-year-old president is not yet willing to give up his titles as leader of the party and the army. Jiang allegedly has been positioning his supporters in the party to elect him for another term as army chief, even as probable successor Hu Jintao is being touted as Jiang’s heir.

Kevin Lee / Getty

China has launched a campaign against Muslim Uighurs that is eerily reminiscent of the Cultural Revolution's brutal brainwashing sessions.

Details of Chinese executions are shocking: According to Wang Guoqi, a pathologist who formerly worked for a Chinese army hospital, doctors frequently harvest the organs of executed prisoners, none of whom consented to organ donation. He tells of a doctor removing a kidney from a still-breathing prisoner who had survived the initial gunshots. After the organ was removed, the condemned man was left to die.

China has taken the battle against the Falun Gong outside its borders. Beijing convinced Cambodia to deport two Falun Gong practitioners who had fled to Phnom Penh and has used its consulates in America to harass Falun Gong adherents. One Falun Gong follower in Washington claims that Chinese agents have recorded his private conversations and then left the recordings on his answering machine to intimidate him. Beijing also may have influenced the stance of Hong Kong’s government and media toward Falun Gong. In April, the South China Morning Post, Hong Kong’s leading English-language newspaper, abruptly dismissed its Beijing bureau chief, Jasper Becker, who had written several probing stories about Falun Gong. Then in August, a Hong Kong court found followers of Falun Gong, which is not outlawed in the territory, guilty of “causing a public obstruction” by protesting outside the Chinese government’s main office there.

Beijing also has shrewdly capitalized on post-9/11 fears of Islamic terrorism to launch a “strike hard” campaign against Muslim “splittists”—groups of ethnic Uighurs living in the western Xinjiang province, the site of diffuse but violent separatist movements in the past. Yet according to Dru Gladney, an expert on Chinese Muslims at the University of Hawaii, most Uighurs have become less enamored with separation as they have watched chaos envelop their independent, post-Soviet Central Asian neighbors. Even Uighurs advocating increased autonomy primarily desire more freedom to study and utilize the Uighur language and to halt the flooding of the province with ethnic Han Chinese. (There were roughly 300,000 Han in Xinjiang in 1949; today there are more than 6.4 million.)

Still, the “strike hard” campaign has been exceptionally broad, perhaps reflecting Beijing’s fear that some Uighur activists might link up with Tibetans and other disgruntled ethnic minorities. Vocally linking its crackdown to the international war on terror (Beijing claims al-Qaeda terrorists are hiding in Xinjiang), the Chinese authorities have deployed 40,000 new troops to the province, burned Uighur-language books and held “political education” sessions for 8,000 imams. These campaigns are eerily reminiscent of the Cultural Revolution’s brutal “education” brainwashing sessions. Meanwhile, the security forces have detained thousands of Uighurs and executed several alleged separatists. As Craig Smith of the New York Times noted after watching one man be sentenced to death, Xinjiang is “the only place in the country where people are regularly put to death for political offenses.”

Despite the vicious campaigns against Falun Gong and Uighur Muslims, Beijing probably most fears rural Christian evangelical groups, since evangelical uprisings helped topple several pre-Communist governments. “The number of Christians in China is growing strongly, and the government knows this and is worried,” says Joseph Kung, president of the Cardinal Kung Foundation, a nonprofit based in Connecticut that promotes the Catholic Church in China.

Over the past three years, public security officials have targeted prominent sects such as Eastern Lightning and the Church of God, as well as underground Catholics loyal to the Vatican. (Officially atheist Beijing sponsors a state Catholic Church that does not recognize the pope.) Beijing increasingly has pitted mainstream Christians against charismatic evangelical groups, allowing some Protestant groups to worship quietly if they cooperate with security forces in rooting out other sects. What’s more, a series of the government’s own documents issued between 1999 and 2001 (and smuggled out of the country) reveal systematic efforts to arrest and kill members of evangelical churches. (In the documents, one of the subversive “crimes” pinned on evangelicals is “praying for world peace.”) Indeed, adherents of underground sects have told human rights groups of security forces beating them with bars and electrically shocking their genitals.

nother main target of government repression has been the nascent peasants’ rights and labor organizations. According to He Qinglian, at least 150 million peasants have lost their jobs over the past decade. Upon joining the WTO last winter, Beijing pledged to slash subsidies for state enterprises, reforms that probably will put at least 50 million more people out of work. Already, state workers are rarely paid, since many state-owned companies have no revenues and have been stripped of assets by their directors. In cities throughout northeast China’s “rust belt,” home of many formerly state-subsidized companies, thousands of unemployed workers wander the streets, sleeping on benches, selling their bodies for sex, and begging for scraps of food. China labor experts estimate that the rust belt unemployment rate tops 20 percent, and many laid-off workers will never find another job, since their skills are ill-suited for an open economy.

Chinese farmers, who still comprise more than 50 percent of the population, also are in a precarious position. Most Chinese farms are less than two acres in size and will be unable to compete with the foreign agribusiness giants now entering China. The per capita income of rural residents is less than $300, compared to per capita incomes of over $4,000 in Shanghai. At the same time, farmers actually pay higher taxes than urban Chinese, since they cough up both the national fees and local “special taxes” collected by rural officials. Making matters worse, developers frequently confiscate farmers’ land to build homes for China’s sprawling cities, often paying no compensation for the property, since most peasants do not technically own their land. Even China’s state news agency recently conceded that 12 million rural peasants will lose their land to urbanization over the next decade, a figure probably too low by half.

Many farmers and laborers have begun to express anger at their bleak situation. The number of peasant and labor protests is rising sharply, and is likely to increase as China meets its WTO requirements. In 1998 alone, Chinese labor activist Han Dongfang recorded more than 200,000 protests involving some 3 million people. During the course of these protests, 78 police and government workers were killed. In 2000, the most recent year for which statistics are available, labor disputes rose by 12 percent, as workers in several rust belt cities besieged their factories and won some unemployment benefits, encouraging other laid-off workers to protest.

In some cases, local governments and state enterprises have tolerated limited protests or have bought off farmers and laborers with minimal unemployment benefits. But if the protests continue over the course of several days, or threaten to spread to other areas, officials show no mercy. State security agents arrested whistleblowers in the rust belt province of Liaoning, who exposed corruption at state enterprises, as well as Chinese journalists who reported on peasant protests. Protest leaders have been arrested and brutally tortured, their cases widely publicized as a message to other workers.

oreign companies have been complicit in China’s human rights crackdown. Though the international media have celebrated the Internet as a potential liberalizing force, Beijing recently rolled back Internet freedoms. Many Internet cafes have been shuttered, chat rooms are closely watched by a force of 40,000 Internet security agents, and Beijing is constructing a system to monitor all Internet users. China also has used Internet firewalls to block hundreds of foreign Web sites such as the BBC and Falun Gong; the New York Times won a reprieve only when its editor appealed personally to Jiang Zemin. Chinese who helped others get around the firewalls have been jailed.

In July, Yahoo! signed a voluntary self-censorship pledge written by Beijing; portals that sign the pledge promise not to post any information the Chinese government considers a threat to “state security” or “social stability.” According to Human Rights Watch, a recent internal memo at America Online recommended that staff abide by potential Chinese government demands for information on political dissidents. Meanwhile, Rupert Murdoch’s son James, a top executive at the global media conglomerate News Corp., has publicly echoed Beijing’s condemnation of the Falun Gong, calling the group an “apocalyptic cult.”

Beijing has allowed local and foreign reporters some freedom to report on problems in the country’s business sector. Beijing tolerates more vibrant business publications, because the government realizes an open financial press helps convince investors that China is becoming more transparent. Still, aggressive reporting, even in the business and financial sectors, can be punished if it implicates high-ranking officials. Over the past year, many Chinese companies have used the country’s compliant judiciary, which convicts roughly 99 percent of defendants, to file—and win—defamation suits against business reporters.

China today is a paradox. No longer the Maoist totalitarian state, it has yet to become the liberal society so many foreign observers predicted. It has opened its economy rapidly, and urban Chinese have adopted many of the practices of industrialized economies with remarkable speed. Young urbanites today can dress as they like, watch a range of foreign television programs, even fly to a remote province to enjoy their own “Chinese Woodstock” rock festivals. But those who praise Beijing for reshaping its economy and allowing some of its citizens to improve their standards of living have ignored one unseemly fact: China is becoming more repressive, more suffocating of civil society—and potentially more combustible.

Even some state-sponsored Chinese academics have begun to predict that if inequality between urban dwellers, laid-off laborers and peasants continues to rise, and if the government does little to accommodate civil society and tolerate dissent, the People’s Republic could face a social explosion or another national protest movement similar to the one in 1989. “There are hundreds of little brush fires burning,” warns David Zweig, an expert on rural China at Hong Kong University of Science and Technology. “Will they become a blaze?”