I can see them putting a guy in space, and perhaps doing a small space station by 2010, but as Jim Oberg pointed out, the logistics for a moon base are beyond them right now.
I have to think that the real reason they're doing this is because it's a status thing. Space is what Great Nations do. This probably increases the chances that they may actually try -- it's much easier to justify it on nationalistic grounds than it is on technical ones.
However, the essentially political nature of the attempt also makes me think that it'll be the first thing to go when China's domestic difficulties begin to mount.
And in the early 60's, putting a man on the moon was beyond our abilities too. However, stating a goal, and working towards a goal, means that the abilities grow. The sciences that have spun off of NASA are over 100x the cost of the Appollo programs. The advances that were made in communications, medicine, computers, software, materials, remote sensing, etc, etc. have far exceeded expectations. As it is now, the USA does not have a stated goal or mission in space; let alone a timeline for doing anything remotely new.