This answer is inspired by Liza Tobin's essay "Xi’s Vision for Transforming Global Governance: A Strategic Challenge for Washington and Its Allies"Fn.1; I draw on no new knowledge or insight into China here.
With that said, we (Westerners) conventionally interpret of "democracy" as
The policies of a countries government are determined by the opinions of — and go to benefit — the majority of that country's residents.
As I argue below, this stands in contraposition to authoritarianism and colonialism. Western democracies believe they are democratic because they are not (typically) authoritarian; China believes it is democratic because it is not colonized.
Any government, even an extremely undemocratic one, has a "selectorate": a minimal set of stakeholders who must remain pleased for the government to stay in power. Democracy is thus a twofold condition: a democratic government must have some social technology to integrate the opinions of its selectorate, and it must ensure that the views of the selectorate remain representative of the populace as a whole.
Conventional Western democracies have a very strong and powerful tool for integrating the views of a large selectorate to produce coherent government policy: competitive elections. Using this tool, they are able to expand their selectorate to almost their entire population, so that a majority of the selectorate is guaranteed to represent the opinions of the populace.
Or so you'd think! The theory of the Overton window suggests that the true selectorate in Western democracies is not in fact the voters, but rather the "chattering classes" that help produce arguments to convince voters; the strong influence of money in politics then tends to artificially restrict the Overton Window, so that the selectorate is no longer representative of the populace.
Perhaps for this reason, the bogeyman for Western democracies is the tyrannical European monarchies of the 16th through 19th centuries, in which the small selectorate lead to strong restrictions on freedom of the press and freedom of conscience.
Conversely, without free elections, China has a very weak tool to integrate a small selectorate. The other answers discuss the Chinese electoral system thoroughly; in order to maintain power at the apex, all (all!) Xi Jinping (say) need do is placate his immediate subordinates.
Instead, the Chinese focus their efforts to maintain democracy on ensuring that this small selectorate is representative of the populace as a whole, a process they call "consultation." Roughly 7% of Chinese citizens is a member of the CCP and their professional advancement (even in non-political fields!) is strongly dependent on maintaining good status in the party. At the local level, party leaders value consensus amongst party members highly. So once the party leaders settle on a policy, citizens tend to coordinate their views to match (cf. Arendt on Gleichschaltung). At the same time, the party's tentacular reach into civil society and the business community allows it (in theory) unprecedented insight into emerging discontent, which it can then "head off at the pass".
The bogeyman for modern Chinese national thought is 19th century imperial subordination, in which the small selectorate (of foreign capitalist investors) was hardly representative the Chinese peasantry. Indeed, those investors' non-Chinese ethnicity almost guaranteed it! Unsurprisingly, Chinese democracy attempts to guard against this failure mode.
I leave it to you to judge whether the Chinese method is successful at developing democracy (cough cough Tibet cough cough) and — if successful — sustainably so.
Fn. 1: I was linked to Tobin's article by Tanner Greer essay "Where is the Communism in the Chinese Communist Party?", which answers a similar enough question that I feel obliged to link to it here.