Francesco Sisci makes an astute observation in the Asia Times:

This April 12-15, China hosted an international Buddhist conference in the city of Hangzhou. With that gesture, Hu
    acknowledged that he recognized the common people’s need for religion, and his willingness to channel that need toward institutional faiths.

This pragmatic move was in sharp contrast to the naive mistakes of Hu’s predecessors, whose refusal to open up to religion and stubborn resistance to a freer flow of information led people into the arms of apocalyptic sects     preaching absurd doctrines about the end of the world. Hu’s approach was a signal of non-hostility to religion. It also tied into a large Chinese charm offensive, the opening of Confucius Institute language centers all over the world,
          starting in such cities as Paris and Berlin…

China, the country with the largest Buddhist population,
        could make Buddhism an instrument of influence in the world. Without drawing simplistic comparisons, Buddhism could be to China what Christianity had been to the West: a way of creating new value sets in continents and countries distant from the Asian mindset. In this sense the People’s Daily argued that religion could be a useful tool to help the world understand China

 It could also help the Communist Party maintain its domestic political hegemony.  Institutionalized religions might provide people with new sources of meaning to fulfill their spiritual desires and reduce any dissatisfaction created by a rapidly changing society and economy.  That might explain the many young people we saw at the Lamist Temple in Beijing recently:

      It might also explain the new mosque in Dunhuang:

      I took the mosque (parts of which are still under construction) as a sign that the local Hui (ethnically Han Chinese Muslims) community wanted a formal place of worship, and that the local CCP leadership was willing to accommodate that desire.  The government is quite actively working against "separatist" Muslim "terrorists," especially among the Uighur population, but it is also trying to cultivate the political loyalty of the "good Muslim" Hui.  This same compromising attitude is also to be found in Xian, where the famous Grand Mosque, in a classical Chinese architectural style, calls the faithful to prayers at the prescribed time:

       And we find the same government effort to harness religion to the purposes of modernization in this story about religious Taoism:

   For 48 years it has lain submerged in a reservoir.
              Now, completely reconstructed, Jingle Palace, the most magnificent of the nine Taoist palaces in UNESCO’s world heritage site of the Wudangshan Mountains, was opened to tourists in late March 2006.

      The economic angle is obvious: rebuilding temples and mosques is good for the tourist business!  People like me go and take pictures.  Indeed, the neighborhood around the mosque in Dunhuang is being flattened to create a "minority people’s neighborhood," not quite as bad as the minorities theme park in Yunnan, but close enough: a simulacrum of the "happy minority people in their colorful dress," etc.

     The hope, then, is to buy off religious believers with one part (limited) freedom to worship in non-political ways, and one part material profit from the curious tourists who come and spend money.  Will this work?  Will it divert the critical aspirations of enough Chinese believers and thus bolster CCP rule?  Or will it start a religious mobilization that might turn against the state?  Religion can provide a powerful basis for principled resistance against injustice and tyranny.  It seems that the Party is willing to allow for a modicum of religious practice, risking its possible politicization, and hope that spiritual belief will dissipate criticism of the regime.