Since I've seen the same reason being given many times, and I don't actually know if it's true or not, I have to wonder: why do you think that free and fair elections along with free press a necessity for China to be world prominence in term of economy?
Democracy and freedom is certainly worth striving for, I just don't know if there is an absolute connection between them and economic power.
The mainstream of political/economic thought is that economic power, in the long term, derives from inclusive political institutions. It can be gained in the short term when totalitarian regimes have incetives for growth and sufficient resources available, for instance the industrialisation of the USSR in the early 20th century, but they will ultimately founder due the contradictions imposed by extractive political institutions.
Since we don't know of any system other than democracy that can produce inclusive institutions, democracy and freedom are a pre-requisite for economic power that will last and continue to grow.
That's my understanding of the argument, based on reading 'Why Nations Fail' by Acemoglu and Robinson. As far as I can tell this is the prevailing line of thought in the West, even if it's not always stated in the same terms.
It's because of the lack of creative destruction blowing through the country. An ossified political strata is resistant to new ideas. A lack of new ideas and lack of dynamism creates a self-reinforcing negative spiral.
China has been down this path before- once a technological leader of the world - it turned inwards and lost ground to the dynamic, open and inclusive societies forming in Europe during the medieval period.
China became a technological leader of the world during its imperialism. Granted there weren't that many democracies around the world at the time, so we have no point of comparison. The few period where there existed a democracy in the world (ancient Roman, for example), it's quite hard to compare the two, and what worked in the past might not work in the present.
But my point is that it's just not simply a clear cut issue of "democracy", "democracy" like everyone in the West like to chant whenever they talk about China (and to certain extend, East Asia as a whole). Look at Japan, one party (Liberal Democratic Party) has been in control of the goverment since 1955 - and not because of corrupted election or anything like that. The social and cultural situation in East Asia is much difference than the West.
Democracy and freedom is certainly worth striving for, I just don't know if there is an absolute connection between them and economic power.