Philip Gourevitch reported about this in a recent New Yorker, adding much background information about Liao's work and activism, but I've seen almost no mention of it in the mainstream media. In fact, I rarely if ever see any discussion of the treatment of Chinese dissidents in the media or among government officials, not least conservatives/Republicans, who still love to rant about "communism" and "socialism" (and harp on Cuba and Venezuela, no less) however terribly misapplied both labels are: I guess the price of China's underwriting our unsustainable way of living is, despicably, official silence.
But back to Liao: this was the second time he'd gotten in trouble involving potential travel to Germany. As the Human Rights in China website (h/t Pierre Joris) points out
In early 2010, after Liao Yiwu accepted the invitation to attend lit.Cologue from March 10 to March 20 – with planned activities including lectures, readings, performances with German musicians, and meetings with German readers – he was warned by police that he would not be permitted to leave the country. On February 8, Liao Yiwu wrote to German Chancellor Angela Merkel to ask for her help, a letter which HRIC previously released in Chinese and English. According to Liao, German officials have relayed a message from Merkel to Liao that she would try to intervene, but that, if unsuccessful, he could wait for the next opportunity.
After Liao’s letter to Merkel was made public, he was threatened by Chengdu police on February 26. They even asked him to cooperate with the government by saying that he did not want to go abroad. The police also warned him against accepting international media interviews, telling Liao, “They are harming you and don’t care whether you live or die.”
This is the second time in less than six months that Liao has been denied permission to travel abroad. In October 2009, Liao was not permitted to go to Germany to attend the Frankfurt Book Fair.