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A very interesting discussion here.
To the people who say that in time, the Needham question may become moot: sure, in time China may very well catch up or even surpass the West, but that possibility doesn't invalidate the question nor diminish its interest.
To xeroid47: your post sounds quite defensive, twice mentioning "sneering". I'm sure many Westerners, including perhaps some of the participants here, have a sneering attitude, but the discussion seems for the major part to be well-informed and respectful of China.
I don't think it's an insult to China or to the Chinese to observe facts as they are -- in this case, China's relative regression compared to the West in recent centuries -- and to speculate on the reasons for this. The West has also gone through a major fallow period, namely the Middle Ages in Europe between the disintegration of the Western Roman Empire and ca. 1500. During this time, the achievements of European antiquity were preserved by the flourishing Arab culture south and southeast of the Mediterranean, while Europeans were a bunch of warring tribes wallowing in mud, to caricature a bit. This is also simply a historical fact, and mentioning it should cause no anguish in any Western person.
I thought you had a good point about the relationship of science and engineering. And if and when China and the rest of East Asia does regain its former position, anyone left in the West who does view the region in a "sneering" manner will have few grounds for that view.
As for imitation, most of what anyone does in the world is imitation of one kind or another. Progress is made mostly by refining old inventions, or through combining them in novel ways. True original geniuses are few and far between; in the West, China, or anywhere else. That said, many small, "unoriginal" steps can make something almost original, or server as the basis of a new, original invention. Cultures which encourage experimentation and progress will have a better record of original inventions.
You write: "Finally there is the cultural defense which will probably dismiss India as a democracy and China's being a capitalism but authoritarianism block to free science, but consider what China has changed in the last 30 years in terms of personal liberty I would not be too sure putting bets on that either."
Here I think the current critique is quite valid. To have a thriving scientific and technological culture that can make truly original contributions, a minimum amount of freedom is a necessity. It's true that after Mao, China has cast off a large part of the old Communist repression, especially in the economic sphere, and this is excellent. But censorship and repression remain in place against people questioning the Communist party's supremacy, and as long as they do, this will act as an enormous handbrake on China's progress. Sure, some amount of "neutral" and state-serving science and technology can flourish, as did mathematics and military engineering in the Soviet Union, but in the long run, educated, gifted people need to be able to speak freely in order for society to make progress.
For instance, if people are not free to be able to point out, and scientists are not able to study, without fear of reprisal, the enormous amount of pollution that is the result of China's industrialisation, and thus to prompt the society to do something about it, that society will (in some cases almost literally) choke on its own success.
Also, I would love for individual liberty to flourish in China -- the same as I feel for all other places -- not only because they are good for science and progress, but mainly because human rights are a good in their own right.