At Foreign Policy, Eric Abrahams describes the fall and rise of humour in the People’s Republic:
… China’s educational policy and official pronouncements did not stray far from this pattern of value statements mindlessly repeated and the discouragement of independent thought — hardly fertile ground for humor or subtlety. The end of the Cultural Revolution and Mao’s death in 1976 occasioned a sort of national sigh of relief: While official language evolved only slowly, civil society was once again given space to develop on its own, leading to the culturally fertile 1980s. Writers, not surprisingly, were at the forefront of a slow resuscitation of nuance and irony in the Chinese language during this time ….
But it was really the Internet that salvaged Chinese humor, and especially irony of the embittered sort that Wang Shuo had pioneered. In the late 1990s, the Internet was still entirely uncensored (it would remain that way as late as 2004 or 2005), and it became, at last, a public space for writers and thinkers, who had been stifled by the government-controlled mainstream media, to explore new kinds of voices. Wang Xiaoshan was the founder of the “Black Humor Wire Service,” a parodic news service reminiscent of the Onion. The wire service, founded in 1999 and still in operation today, in gentler form, gave journalists and writers a desperately needed outlet. “Xinhua was fake,” shrugs Wang, referring to the official Chinese wire service. “We were fake, too.”
(The claim that the Internet remained “entirely uncensored … until 2004-2005” is questionable: a 2003 report on China by Reporters Without Borders describes China’s “gigantic apparatus of monitoring and censorship”, developed over the course of the preceding eight years.)
For examples of online humour in China, check out the Grass-Mud Horse Lexicon.