What do you mean by the monasteries being "required" to hang up pictures of the leaders? Is this really some kind of instruction issued by the government? Who issues this requirement? Could it be something that just the abbot has instructed?
The Chinese government, I'm sure, are acting from a political stance. This is not unusual, nor should we fault them on it - all governments have tricks up their sleeves.
Much as I hate politics though, I really don't find this negative. In a place like China, I'm sure that seeing pictures of political leaders is not unusual. Did you ever think that it could possibly be something to garner even more support for the monasteries from the local people? If they see the monasteries being endorsed by the government, and the monasteries being respectful to the politicians, it could be regarded as something correct, authorised and inspire confidence in the common person.
From a western perspective, this is shocking of course. we know we shouldn't mix religion and politics. in China though, there religion has never even been allowed into the equation. In this case, mixing religion and politics may even be regarded as a good thing - at least they're talking about it and allowing it! If putting in a picture of a political is all that is required for spiritual practice to grow in the area, then that would be a small concession to make.
The aim is to make Dharma grow, after all, isn't it? If that is what is required for them to be able to practice, teach and run their monasteries in peace and with the support they need, then I say, why not!
After all, when in Rome...