I think there’s a realistic chance that China could simply leapfrog the west by developing an alternative computing substrate. We’re basically reaching the limits of what’s possible with silicon at this point, and you have to spend incredible amounts of effort to squeeze out increasingly meagre performance gains. However, a substrate with different physical properties has potential of being an order of magnitude faster even using a naive approach leaving lots of room for further optimization. This would be the equivalent of going from vacuum tubes to transistors.

There are a few other approaches such as carbon based semiconductors, carbon nanotubes, and graphene based semiconductors that China is actively researching. It’s only a matter of time until one of these gets to the point where it can be commercialized. This approach in particular looks very promising where they actually managed to produce new 12-inch wafers that are just one atom thick with low production costs https://pubs.rsc.org/en/content/articlehtml/2021/na/d0na01043j

This kind of tech could end up being commercialized within a decade, and it would make silicon obsolete.

China was focusing on dual circulation for a while now because they realized that their dependence on the west for exports is a risk. I’m sure they learned a lot from Russia’s experience with the sanctions as well. Projects such as BRI and BRICS are another factor, we’re now seeing an economy that’s entirely independent of the west develop around China. It’s also very difficult for the west to interfere with this economy because US is getting steadily pushed out of Eurasia. For example, there’s now a trading route going from China to Iran through Russia and Syria.

And of course, China will always be in a position to retaliate against US with its own sanctions because US is heavily dependent on goods produced in China. We already saw an example of this with Gallium and Germanium exports. US isn’t able to sanction China without massive economic blowback to itself.