That has been argued for near on 200 years, it isn't true.
The economy fails because there are market cycles, some cycles are more influenced by policy that others.
This cycle drop is because of a lot of adverse policies in regard to housing.
China has to employ manufacturing innovation because of the international expectation of minimum quality.
China used to make a lot of just junky crap, see Chinese scooter imports.
Lately they have racketed it up, producing quality low cost items, the growing Chinese middle class is a good thing.