The Chinese are great at copying other people's technologies and they're great at mass-producing products designed elsewhere. When it comes to innovation they drop completely off the radar screen, and as long as this remains true China poses no real economic threat to the US. It would be interesting to know why. Here are two possible theories, one political and one cultural. The political one is that innovators tend to be free thinkers, and the sort of Chinese citizen who might be capable of being a genuine innovator might strike the authorities as being a little too likely to be some sort of political radical and treat him accordingly. To the outside observer, Jobs, Gates and a lot of the other members of their cohort must have had an uncomfortably hippie look, and a culture intolerant of hippies wouldn't have tolerated them. The second is cultural. Innovation involves some degree of dissatisfaction with, or criticism of, the established way of doing things. Often this plays out on a generational level, so that young folks are dissatisfied with or critical of the ways of their elders. In the context of Chinese culture this may be read as an unacceptable degree of disrespect.
Other nations of course have their own innovation-killing features. In Western Europe and the UK, for example, the way the tax codes are written deprives successful innovation of any substantial reward. And in Japan the domination of established mega-corporations probably makes it outrageously difficult to found a startup (and Microsoft has taught us all that innovation gets stifled within a mega-corporation since, as we all know, a camel is a horse designed by a committee).