My answer:
1) I don't think China will collapse, for now. Yes, it's in an economic jam, but so is the rest of the world. I don't think it will destabilize to the point of the government being thrown into chaos. HOWEVER, this is assuming that another black swan will not come along. If Uighurs start an uprising, if Taiwan declares independence, if the bird flu pandemic pops up all bets are off.
2) China will not become a democracy for the foreseeable future. I don't see the fundamentals for a peaceful transition into democratic rule. Comparisons with Czechoslovakia are inappropriate, since the Czech's had a tradition of democracy. Comparisons to Japan are also incorrect, because Japan and Korea had HUGE Western influence in the post-war period. So the country can't pull a Velvet Revolution AND it can't be pressured or encouraged by foreign powers to go democratic. And just to make the human rights people aware, you can't embargo it into democracy like South Africa, because it's economy is too big. Most of the interior is still rural and poor, and nearly everyone still supports the CCP. What I do see is increased government centralization (people view local governments as corrupt and want the central government to help with every problem from snowstorms to the milk scandals) and more calls to nationalism ('08 Olympics Torch Relay showed a small sign of that).
Beyond that, the best way to predict what the CCP will do is to think like them, and the only thing they are thinking of is how to perpetuate their continued political rule. And thinking from this perspective, democratization is a big mistake. The CCP looks at examples like the Former Soviet Union and India and nearly soils itself at the thought of either becoming a crony authoritarian thug state, or a sclerotic democracy with a congress crippled by parties drawn along ethno-religious lines and the entire former Republic split into India, Pakistan, and Bangladesh.
3) I think it's easy for mysu to talk big on how Taiwan belongs to China, because he probably wouldn't fight in a war to "Liberate Taiwan". I don't take sides in the independence/reunification debate and agree with American policy to let Taiwan sort it out for itself. But I will say that most people from Taiwan are like me: An invasion of the island is an invasion of the people and families living on the island. It would instantly unite the island, not in the whole intangible independence issue, but the much more tangible "these guys are trying to kill us" issue.
