This is a perfectly rational decision, you just need to look at it from the value system making the decision. The Party's #1 goal is to remain in power. Pretty much everything they do is with that in mind. They also seem to assume that revolution is always knocking at the door. [1] Communism has had a long history of ideological coercion (it's pretty much a founding principle), so this sort of thing should come as no surprise. In fact, it's a lot more subtle than most. [2]
[1] This may not be so far-fetched. Several years ago a Party document was released documenting 100k or 200k protests, ranging from small to large. When the bullet train derailed 3 or 5 years ago, Weibo went wild within minutes and ultimately some provincial Party officials took the fall. And the example of Arab Spring has got to be pretty scary.
[2] I don't know if it is true anymore, but historically people were encouraged to rat out neighbors with ideological deficiencies. Not just in China, this is pretty much standard fare in totalitarian states.
