I think you misunderstand. China is not a heavy-handed police state not because everyone is perfectly free, but because not everyone is unfree. The police simply isn't equipped to oppress everyone, so it only hits an unlucky minority. It's just that in China minorities can comprise millions of people. So while in the worst case you might be executed and have your organs harvested, in the average case you'll not even be paid attention to.
For example, when I lived in China my landlord violated several regulations on minimum unit size and fire safety, forged documents to hide this and probably also didn't pay any taxes on the rent I paid in cash. One day there was a notice by the police posted to the door, announcing that they'd come investigate. Some time later I got a message from my landlord warning me and the other tenants not to open the door. The police never came. I assume he either paid them off with a bribe or they were simply too lazy to follow up on their threat.
If China is a police state, then it's one where the police doesn't take their job very seriously.
Sounds like you completely misunderstand what a police state is.
A police state does not require the police to be concerned with upholding the law. In fact there is usually a departure from the rule of law in police states.
As the other commenter mentioned, the police in a police state are usually concerned with maintaining order and protecting the power of the state or ruling faction, and policing people's behaviour to this end.
I mentioned the anecdote because it's the one case I personally experienced where the police actually got active on an issue, and nothing came of it. I know plenty of people whose behavior looks like it'd be policed (censorship circumvention is endemic, discussing events that reflect negatively on the government is common, some openly advocate e.g. for gay rights) but there's no indication the police are even aware of them.
I don't deny that e.g. forming an organization directly challenging the CCP's leadership would get you into deep trouble, but most activity below that threshold appears to go unpoliced. Even the currently ongoing student protest at Beijing Normal University's Zhuhai branch doesn't seem to have met any police resistance so far.
Police state is more concerned with „crime” of subverting the ruling regime, not all crimes in general. See Stazi, with their absolutely vast network of informers - they too didn’t care if you avoided taxes or broke tenant laws.
(There doesn't seem to be any English reporting on this, but the videos and images should speak for themselves with the added context that this is a demonstration currently happening in Mainland China to protest plans to shut down the local university and establish a more elite institution on the same campus.)
For example, when I lived in China my landlord violated several regulations on minimum unit size and fire safety, forged documents to hide this and probably also didn't pay any taxes on the rent I paid in cash. One day there was a notice by the police posted to the door, announcing that they'd come investigate. Some time later I got a message from my landlord warning me and the other tenants not to open the door. The police never came. I assume he either paid them off with a bribe or they were simply too lazy to follow up on their threat.
If China is a police state, then it's one where the police doesn't take their job very seriously.