Innovation requires two sorts of deep understanding: what people need, and what one can create. We are losing the latter, because much of the creation has gone elsewhere. A lot of Apple's design power comes because they're still deeply involved with the million physical details most companies now ignore.
Software for the US market may be a defensible competency, because we understand both medium and need. But there's little reason to expect that most of China's software will come from the US; they're developing the capability, and understand their needs much better.
Remember, to get China to send us the stuff, we need to send them something in exchange. Right now for every $1 of goods we send them, they give us $3.5 back. That's not sustainable.