This argument never sounded very true and intellectually honest to me. I mean, I want to believe in it, but when I scrutinize it precisely, I wonder - how can you measure the ability to innovate of someone who doesn't want (or need) to innovate?
At present time, China's competitive advantage is cheap specialized labour, and they're taking full advantage of that - as they should. That's the whole point of being behind in technology and racing to catc up! It might very well be that when they switch their focus, from copying to innovating, they'd be very good at that as well (or very bad! we literally have very little data to tell)