I had to Google the missile thing. Bit of a shocker: "Last year, the U.S. Navy bought 59,000 microchips for use in everything from missiles to transponders and all of them turned out to be counterfeits from China." (http://www.businessinsider.com/navy-chinese-microchips-weapo...)
It's really a touchy situation, no matter the angle you look at it.
manufacturing =/= innovation
Who do you think writes all the software for those manufacturing facilities? Yahoo?
Who has launched satellites into orbit to test quantum communications? Uber?
Don't get caught up in association fallacies about who is able to innovate. A quarter of the world lives in China.
There are more people in China than in the United States, Europe, and Russia combined. China already manufactures your clothes, chips, computers, phones, and missile chips. I don't think it's correct, given the world's dependence on China, to say China is somehow behind the times (wrt computer innovation).