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The lack of technological innovation in Chinese civilization was the result of a tremendous luxury Imperial China enjoyed. No civilized enemies. The constant arms race since the invention of the crossbow that triggered Western technological progress was the result of Europe having three or so major powers (England, France, the Hapsburgs/Holy Roman Empire) and occasionally dangerous ambitious wannabees to balance things (Holland, Prussia, Venice, Sweden, Saxony, etc). A major military innovation could turn a wannabee into major player and a major player into an empire.

Also, Northern Sung China came within an inch of an industrial revolution. The key to firearms isn't gunpowder. It's making good, cheap metal. The development of the coking process for making purer, stronger, cheaper iron made the mass conscript armies and plentiful artillery of the Napoleonic Wars possible. Chinese entrepreneurs were beginning to create large scale iron production enterprises. But the imperial bureaucracy, fearing a rival bourgeous class, had them shut down. So China never had a chance to develop the firearms that might have stopped the Mongols. To them technological innovation was suspect and potentially dangerous.

Modern China had a tremendous advantage that Russia did not. It had that enormous pool of talent and wealth to draw from; the overseas Chinese. Their role cannot be understated. Chinese wherever they go practice the higher return Jewish model (high education, the professions, retail business ownership) instead of the lower return Irish-Italian-Black model (sports, entertainment, organized crime, machine politics, civil service). As such China will be vastly more formidable than the Soviet Union ever was. Try as they might the Russians just can't seem to get past a Mafia model of capitalism. They have yet to produce world quality export goods.

China will always have a strong state capitalist sector of the economy. That is their culture. Chinese civilization is built around organized water control on a massive scale from the rice paddy to two enormous rivers that do great damage with great loss of life when dikes or canals are neglected. Libertarianism is only for people or societies that think the world is a safe place and China is none such.

I think it incredibly significant when people like Kissinger are flatly saying that if the level of offshoring continues America will not be a great power a generation from now. People who can see past the next quarter are scared.

You hit the nail on the head. Spot on

"Neccessity is the Mother of Invention"

The Chinese Emperor does not feel the need to progress any further. China was the top dog, the only superpower in her part of the world, East Asia for the last several millenia. The Japanese was not a threat. The Japanese samurai class prevented the use of firearms as it violates the spirit of the Bushido, and the supremecy of the sword---only cowardly scum uses firearms. Similarly in China, the Kung Fu warriors regarded the firearms as coward's weapons.

Without any credible enemies, China felt over-confident and became covered in a time warp, and stagnated while the west progressed and modernized. The Western powers realized the importance of Scientific research into weaponry and spent lots of money into it.

The Chinese Qing Dynasty was on the other hand keen to keep the people poor and stupid so that it could continue its rule---if the people were educated and smart they would question the "Mandate of Heaven" and rebel. The Qing were Manchu conquerors of China, you see. One British General wrote in 1890 that the Chinese emperor was so fearful of the Han Chinese people having good quality artillary with which they could use to fight Qing that all the Chinese artillary were of poor quality, with the cannon more likely to explode in the faces of the artillarymen themselves. The Qing Manchu Army had a fearsome cavalry ,you see.

The feudal Emperor did not provide any universal education to the people, unlike Europe which went all-out to educate the people.

The feudal Emperor did not spend any money on R&D on weaponry

Chinese entrepreneurs were beginning to create large scale iron production enterprises. But the imperial bureaucracy, fearing a rival bourgeous class, had them shut down.

The problem in a nutshell. Europe eventually came into its own in no small part because there was very limited centralization of power. While they started way behind the curve, outside technologies really fueled and bootstrapped what was otherwise a (relatively) highly competitive free market system with a mediocre educational basis. Europe was never amenable to centralization and this made it very competitive. For a while, the Catholic church came close to making Europe share the fate of China, but it slipped through their fingers as well. China was very advanced, but the environment wasn't competitive which dampened progress. Europe was backward but also highly competitive and adaptive, and only needed to be primed with someone else's technologies.

The Europeans had difficulty developing the core technologies, but the social, political, and cultural climate allowed them to exploit the core technologies developed by other peoples despite their initial barbarian status, allowing them to bootstrap to the same level as other cultures rather quickly.