China is already working on the software part of chip design, and they have domestic capability to produce 14nm chips (SMIC) that is using ASML machines though. (But the US cannot take them away, only stop them buying more). I'm sure they are considering building their own fabrication machines. I fully believe China is capable of domesticating the whole fabrication process given some time. China was able to design and build their own domestic computer in the cold war, a few years after the US, but taking less total time than the US did. China is the world's leading productive superpower, and what I think is most important, is they have a culture of teamwork, rather than competition, to drive innovation.