The current theory is that the NBA is big in China and swimming is, well, not (although it should be noted that Mao loved the water and, despite pleas from his doctors, would go for dips in China's less-than-inviting rivers to show off his manatee-esque physique, see photo at left).
This sounds convincing, but I think the real story has to do with what Michael Phelps and Kobe Bryant stand for. Kobe Bryant embodies the America the Chinese government can tolerate: corporate America. Corporate America is not threatening to the Communist Party. Not only is corporate America willing to play by whatever rules the Party tells it (as long as it is allowed to make money), corporate America also shares a common approach to the public: appear to serve their interests while manipulating them to your ends. Phelps stands for the other America: individualism writ large. His accomplishments suggest that one man matters, that one person can accomplish amazing things on his own. That is a message that terrifies the Communist leadership. And, worse still, it’s clear that Phelps isn't just doing it for the money. If Phelps achieves the impossible and wins eight gold medals he gets a million dollars from Speedo. A million dollars? Is Dr. Evil running the outfit? Kobe Bryant makes a million dollars by waking up in the morning.
