Some critics of the government also hope that hard-liners in the Communist Party will lose ground against their more moderate counterparts as Beijing realizes that its efforts to repress Liu only made him a martyr.
China's anxiety over the prize was evident as the announcement drew near. During the summer, as rumors of the front-runners began to fly, a senior Chinese diplomat met with Nobel Institute Director Geir Lundestad in Oslo to try to dissuade the judges from naming Liu.
Deputy Foreign Minister Fu Ying warned Lundestad that honoring Liu "would pull the wrong strings in relations between Norway and China," the Nobel official told Norwegian news agency NTB.
It wasn't the first time China had sent diplomats with warnings, said Lundestad, who added that the committee would not be swayed.
The arrest of dissidents is commonplace in China, often unreported by state-controlled media at home and treated with cursory attention by the international press. But human rights monitors have long regarded Liu's case as a key test of both Beijing's tolerance for dissent and the international community's appetite to challenge a major ally or trade partner.
When Charter 08 was published, investigators fanned out to question those whose names were on the document. Some were placed under house arrest; others were imprisoned.
Liu was at first held incommunicado, then detained while awaiting trial. During those months, the Chinese government was trying to decide how to proceed, and foreign pressure was badly needed, said Nicholas Bequelin, a Hong Kong-based researcher for Human Rights Watch.
But foreign governments failed Liu, Bequelin said. He is especially critical of U.S. Secretary of State Hillary Rodham Clinton, who visited Beijing during that period and made it plain in public statements that the United States was prepared to put human rights on the back burner in the interests of forging better relations with China.
"Our pressing on those issues can't interfere on the global economic crisis, the global climate change crisis and the security crisis," Clinton said at the time.
"It was so incredibly damaging. There was a direct link between this statement and the outcome of Liu's case," Bequelin said. "The diplomatic community was always unwilling on a certain level to really fight on this case."
On Friday, President Obama, the 2009 Nobel Peace Prize winner, hailed the committee's selection, saying Liu "has been an eloquent and courageous spokesman for the advance of universal values through peaceful and nonviolent means."
"Over the last 30 years, China has made dramatic progress in economic reform and improving the lives of its people, lifting hundreds of millions out of poverty. But this award reminds us that political reform has not kept pace," Obama said in a statement released by the White House. "We call on the Chinese government to release Mr. Liu as soon as possible."
Foreign ministries from nations including France, Germany, Italy and Britain also praised Liu's selection.
As China's economic clout grows — it recently dislodged Japan as the world's second-largest economy — Beijing has increasingly used a mix of threats and incentives to press territorial disputes and keep domestic critics from winning plaudits abroad.
Beijing has blocked invitations to the Dalai Lama, Tibet's spiritual leader, who last year was denied a visa by South Africa to attend a peace conference. And when a film festival in Melbourne, Australia, last year tried to show a film about Rebiya Kadeer, the exiled leader of the minority Uighurs, all Chinese films were withdrawn and many sponsors pulled out, presumably fearful of Chinese retaliation.
On Friday, China's state media avoided mentioning Liu's honor. Even foreign satellite channels at times went black. Special sections created to cover the Nobel Prizes were suddenly scrubbed from top Chinese news websites.
But word was getting out all the same.
"You can bet that right now all over China there are people trying to Google Liu's name and Charter 08," said Sophie Richardson, Asia advocacy director for Human Rights Watch. "There is no way they can keep this quiet."
Times staff writers Barbara Demick in Dunhuang, China, and Janet Stobart in London contributed to this report.