Propaganda. We americans ate that shit up.
There's nothing special about anything we design in the US other than time and money commitment to create it. China did have some espionage of course going on, but the vast majority of shit isn't some secret. And with the US shitting on China with restrictions, we increasingly caused them to invest time and money into things they otherwise would have passively accepted as coming from the west. ASML sees the writing on the wall for themselves in particular.
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It's both.
The US has generally resorted to propaganda rather than addressing the self-inflicted structural conditions responsible for the erosion of our dominance. China also conducted a broad, sustained, large-scale campaign of IP theft across almost every industry.
Obviously there is no natural law preventing China from innovating (We have treated political liberalism as a prerequisite to innovation in a way that was always partly self-congratulatory), but it's also obviously true that the speed of the gap closure is due in significant part to theft.
That doesn't change the fact that they are now a legitimate competitor who has gotten a lot of things right (and among these, some things that we get very wrong) and probably actually leads in some areas.