China's greatest commercial and industrial successes have been in skipping the "current generation" of whatever is the standard, and moving to the next so that it's competing on relatively even ground with foreign players. Electric vehicles, mobile games, and clean energy are all examples of the former.
By contrast, its slowest progress have been in industries where it's trying to just "catch up" gradually. Gas cars, chips making equipment, and PC video games are all examples of the latter.
This isn't to say China can't succeed in traditional industries. After all, it captured a significant market share of mobile phones and televisions, where it didn't have any sort of technical lead outside of Huawei, which got sanctioned. But grabbing market share strictly by competing on price is not a sustainable strategy because the low barrier of entry squeezes profitability and so makes it a constant race to the bottom. This is why Xiaomi, Oppo, Vivo, etc. have failed to shake the dominance of Apple and Samsung in the high profit, premium sector and are beginning to lose market share, as they fall behind on innovation - or rather never invested much in innovation, in the first place.
It's also why it's difficult for China to break into AAA, a sector of the gaming industry that's traditionally dominated by the US and Japan. To compete in AAA requires Chinese developers to catch up to the mature industrial processes of the existing players, who have decades of experience across all the creative and technical components that go into making AAA games. From cutting edge graphics, to refined narrative and design pipelines, to robust backend services, platforms, and infrastructure, it's not an industry you can catch up in over night.
This is also why I think China would do better to skip the current generation of AAA games and move directly into VR and AR experiences, where the playing field is still relatively green. Or, failing that, it needs to pull a Mihoyo and double down on an emerging genre where it can raise the bar - Mihoyo succeeded because it brought a level of quality and ambition to mobile gaming that no other company has dared to, before it; and Chinese AAA companies that want to succeed, have to do the same and not just settle for making inferior versions of American or Japanese games.
