Coming from a strong Christian background (though I no longer consider myself Christian), I will answer this from my perspective of what Christians/God have meant.
I do not feel that God fears magic. After all, if he created us, why would he create something that could potentially do him harm? The Bible even states that God is within each of us and can be found everywhere, "Look under a rock and I shall be there". This line of thought is in almost every major religion. So it can be taken that God and/or his power is (at least in part) within all of us and all that surrounds us.
Many of the said Christian religions were initial very ritualistic and magical in their own right. In fact what Christ was said to have done (his miracles) were considered by many to be magic and spells. If I am not mistaken Christ himself has never condemned witchcraft. He was a teacher of love for all, acceptance of everyone, and doing no harm to anyone.
There are a couple of points (already made by others) that I believe to be true. Firstly, that during those times it was exceptionally rare for anyone, outside of scholars or scroll keepers, to be able to read or write. This worked very well for those in high positions of power and influence.
Secondly, the Bible in its Hebrew form, can never, I repeat, can never be fully and correctly translated into English. It just simply isn't linguistically possible. There are too many variances and gaps between the languages to get a verbatim translation. Over time, the Bible has been translated, rewritten (as in the different versions, i.e. King James), that no telling what has been lost, or reworded, and has grown too far from its original intent.
I believe, in the end, it was more the Church that feared the power and knowledge the people could gain (whether from magic or by other means). As far as the Christian God, I think if he ever had problems with the occult, it was not out of fear of the peoples knowledge or power. I think was it was more two trains of thought. One, that God himself said he was a jealous god, and perhaps he felt jealousy when his creations were not focused on him. Second, (and this applies to many things in life) that magic can be a powerful thing, but when abused, or misused, it can be dangerous in many fashions.
Besides, if God didnt want us to be knowledgeable (or wanted to keep us dumb) he would have used his omnipotent power to prevent us from eating the fruit from the Tree of Knowledge. Free-will or not, if you believe what the Bible says, God is well within His power to take away our choices, but as of yet, has not done so.
Anyway, my two cents on the matter. This is from somebody who is now no longer a Christian, but explaining it to you as best as I saw it when I was a Christian.