Professor Shambaugh has lived in or visited China every year for the past 35 years and was there last week before visiting Wellington as guest speaker at a conference "China at the Crossroads" organised by the NZ Contemporary China Research Centre based at Victoria University.
He is director of the China policy programme at George Washington University in Washington DC.
He said the crackdown was manifested through arrests, interrogations, disappearances, harassment, extensive censorship, and blocking of the internet and search engines.
"Google is down. Yahoo is own Bing is down. You can't access the outside world."
"They want to build a knowledge economy and they block the world's largest internet firm."
He told the conference that one of the challenges facing China was managing its increasingly strained foreign relations.
Relations were strained everywhere with a few exceptions - Russia, Central Asia, part of Africa, Caribbean States, Cambodia, Laos, Venezuela, Cuba, Pakistan and perhaps New Zealand, he said.
The stronger it has become, the tougher and more nationalistic, more assertive, uncompromising and difficult it has become to deal with.
That was particularly so in the East China Sea in its tensions with Japan and in the South China Sea - where it has territorial disputes.
He said the likelihood of conflict was higher in the East China Sea than in the South China Sea "but in neither place has it reached a 50 per cent probability."
"But it is a possibility. We cannot rule it out. Tension are quite high and China is taking action that is provoking these tensions."
Any conflict would necessarily involve the United States, Japan and Australia.
"But not New Zealand."
"New Zealand is happy to sit on the sidelines and trade, trade, trade."
Every country in the region was increasing its defence expenditure and capabilities with China in mind but not New Zealand.
"Australia is doing it, Asean countries are doing that, India is doing that, Japan is doing that, the United States is doing that so it seems to me that New Zealand is a bit of an outlier in terms of regional relations and even global relations with China.
"To have good relations is not a bad thing but you have to have multi-faceted relations. You can't just have relations with a country based on economic interests alone."
Asked about his view on the People's Liberation Army, and whether it could enter begin a conflict unilaterally, he said one of the great puzzles for China watchers was the degree to which the PLA was under the control of the party.
"My own sense is that it is, very much so," he told the Herald. "You can't have an accidental war started by the armed forces without approval from the senior political authorities in the country."
Professor Shambaugh said China needed to encourage innovation in order to be more inventive and build a knowledge economy to take it from an assembly economy to a more inventive one.
The political system, the education system and the legal system all lay behind the quest for innovation.
Reforms were needed not only for innovation but to control corruption, protect citizens' rights, and to give voice to the aspirations and complaints of average citizens, he said.
"None of this can occur without the loosening of the political system which indeed is getting tighter and tighter."
He said the repression was the worst it had been for 25 years, since June 4 1989 [Tiananmen Square Massacre], and had been going on for five years, under former President Hu Jintao and now under President Xi Jinping, "all of which reveals a very paranoid party state, fearing subversion from the West, and particularly the United States."
He noted positively some reforms including the loosening of the one-child policy, an enhanced role for the market in determined resource allocation, making Government budgets more transparent, more fully funding public welfare and establishing agencies such an a super environmental agency.
There were also suggestions from the plenum that there could be other reforms in the financial sector, the banking sector, an improved foreign investment climate, enhancement of property rights, the tax system and legal and judicial reform.
He said there was real potential for policy break-through but he anticipated great bureaucratic resistance.
"It is not very common in world history for those who have wealth, power and privilege to voluntarily divest it in the broader interests of the nation."
He suggested the party itself could now be the greatest impediment to reform.
"They facilitated the last three decades of reform. Now they are into new territory in which they party and the political system may be an impediment to economic and social reform."
