What is the essential difference between China's classical literature and modern literature?

According to the language, ancient times-mostly classical Chinese, but also a small amount of ancient vernacular. Now-only write in vernacular

Genre-prose, verse and poetry are the main forms-novel, prose, essay, drama and modern poetry are the main forms.

Inner thought-expressing the Tao through words (this is the most important, but not the only one)-promotes the humanistic spirit.

But as far as novels are concerned:

In ancient times, there were only Zhang Hui and the third person, and there were few long psychological descriptions. His origin is rap art, similar to today's storytelling.

Now there are various forms, drawing lessons from the writing techniques of western novels.

In May 4th, Hu Shi proposed to write My Heart with me. That is, it is a high generalization of vernacular Chinese and has a great influence on later generations. You can refer to Hu Shi's article advocating vernacular Chinese.