On one hand you're saying that Xenophobia and divergence from free market principles will make USA lose its edge, but at the same time you are saying China, which is a lot more xenophobic and less adherent to free market principles, will have an advantage...
It's not just about censorship and surveillance. These are there to prevent people from finding out and doing something about other forms of oppression. So what you are saying is that Chinese people culturally don't care about govt oppression unless it's their turn?