Chinese people are aware of what democracy is, they just don't believe it's an effective system.
Understand that the basic ideological foundations of human liberty and self-actualization that we take for granted didn't always exist and aren't shared by everybody. As much as we think of history as a steady march towards progress, it's not a given that democracy will be considered by all as the natural conclusion of human development.
China in particular has a history characterized by a cyclical pattern of rule: consolidation of power -> flourishing of society -> decay -> collapse -> conflict. Rinse and repeat. Every time a dynastic shift occurs, there's mass death to accompany it, whether it be from famine, invasion, civil war, or natural disaster. So it's almost been ingrained into the cultural psyche that a weak government leads to suffering.
Alongside this pattern, there's a historical political concept, the Mandate of Heaven, from which the ruler derives his right to rule. It's similar to the European concept of the divine right of kings, except the Mandate of Heaven is revocable. Basically, heaven bestows the mandate to rule upon a just ruler, but if that ruler is overthrown, it is accepted that the ruler became unworthy and heaven withdrew his mandate. So just as Chinese history is characterized by powerful central governments and autocracy, it's also somewhat contradictorily also characterized by the integral right to civil unrest and rebellion.
Knowing this, the Chinese leadership is terrified of any sign of dissent, which is why we see them go to such incredible lengths to suppress the Chinese population. The populace, for their part, is mostly content to be ruled, because right now the benefits of a growing economy outweigh the prospect of the chaos that always accompanies political change in China. Looking to the 20th century, where the collapse of the Qing dynasty was followed by pretty much 50+ years of horror (the era of warlords, civil war, Japanese occupation, more civil war, starvation, revolution, etc. etc.), you start to understand how the Chinese might value stability over freedom.
Once the money stops flowing though...
