You can say what you want about the inefficiencies and lack of innovation in China's mix of capitalism and state planning, but the facts tell their own story. China now has the world's fastest supercomputer, a 2.5-petaflop system, and is completely focused on building an exascale system (roughly 1,000 times more powerful than a petaflop system), possibly as early as 2016.
Despite this, China is faulted for lacking the entrepreneurial and innovative culture to compete with Silicon Valley. Perhaps that's true -- for now. But China is very good at building big things -- think the Great Wall, for starters -- and supercomputers are becoming very, very big things, soon to cost $1 billion or so each for an exascale system.
So what if the U.S. ends up dominating the tablet computing market? From China's perspective, it's more important to build systems capable of producing truly revolutionary breakthroughs that may lead to new industries and technologies.