I guess it does both and although security might be improved it sure affects the privacy a lot. Just a few days ago I was thinking about such surveillance cameras and although I am definitely sure that they will affect a lot our privacy they will also help in finding criminals. Around my house a few nights ago two cars have had their windows broken on the right side and were "checked" for money and other valuable possessions.
Since the thieves didn't found anything to steal all they left was a lot of mess and a pretty big expense for the owners of the cars. Nowadays cars don't have such easy to steal cd players like years ago and people don't keep money either in their cars. However such criminals still try their luck and break into cars for such purposes. The police has had no recording whatsoever of who did that, nobody saw or heard anything and there aren't too many suspects so who's to blame?
If there were such cameras mounted in my country also and especially in my hometown those thieves would probably be behind bars now or at least they wouldn't try to do such things because they know what are the consequences. For such scenarios I think that the Chinese cameras really come in hand but I don't think that the Chinese government hasn't take into account on spying on its population also when it installed such cameras. I've read a few months ago about the Chinese surveillance system and I also know that the government wishes also to create some profiles to its citizens and restrict their freedom a lot so its not all being created only for the protection of the citizens.
It might sound as it is this way but there is probably more to it. However if you don't abide the law you don't have what to worry about but you might also say good by to privacy if you happen to live in such a country like China. There's always to sides of the coin.