Will new information technologies, especially the Internet, bring freedom and democracy to authoritarian China? This study argues that the Internet has brought about new dynamics of socio-political changes in China, and that state power and social forces are transforming in Internet-mediated public space. Its findings are fourfold. First, the Internet empowers both the state and society. The Internet has played an important role in facilitating political liberalization, and made government more open, transparent, and accountable. Second, the Internet produces enormous effects which are highly decentralized and beyond the reach of state power. Third, the Internet has created a new infrastructure for the state and society in their engagement with (and disengagement from) each other. Fourth, the Internet produces a recursive relationship between state and society. The interactions between the state and society over the Internet end up reshaping both the state and society.