One common refrain is that trade has massive material benefits to all parties engaged in it, but when one party is engaged in immoral behavior, one has to question if one wants to strengthen them with those benefits.

Personally, I think a unilateral severing of economic ties would be extremely counterproductive. However, I think eliminating the policy compartmentalization between trade and human rights issues should be seriously considered. Basic democratic representation and de jure and de facto protection of basic human rights (or at least concrete and verifiable steps towards that goal) should be fundamental requirements for having an open trading relationship with any country. Then it's up the the human-rights abusing country to make the choice about whether it wants to trade or not.

My understanding is that many of these trading relationships were liberalized with the idea that trade would bring political liberalization and human rights with it. That idea has been shown to be false, so policy that's based on it should be reconsidered.

both. I doubt it will stop it in China directly, but if you continue to support them economically this is more likely to spread as they gain more global influence. Ideally there should be none, but if you can't have that containment is the next best thing otherwise you expose a larger population to it.