Silicon Valley: A few big companies and thousands of small companies who's existence is founded and maintained almost entirely on innovation.
Valley startups no longer represent the cutting edge of computing innovation at large [as they did in the 80s], they have mostly escaped competition by hiding in relatively narrow niche of "English-speaking consumer Internet" very much like Detroit has been hiding behind big SUVs. And "release early, release often" web sites are no different from body-on-frame SUVs: their tech is so well understood and simple that Chinese can produce cheaper and faster copycats of facebooks and twitters in a matter of months within an original launch.
When they'll learn to market them properly, they will build their own data centers in San Antonio, TX and the similarity with Detroit will be complete.
That English speaking "niche" currently represents the vast majority the potential revenue. It's a lot harder to innovate than it is to internationalize your software, which virtually every successful company does.
The idea that the value of Twitter or Facebook is in the 5,000 lines of Ruby or PHP that it took to create them is seriously mistaken. Anyone (Chinese or not) can easily clone Twiter or Facebook. Just like almost any competent artist can clone a great painting. That's not the hard part.