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Diamond's answer to this question can be found in the Epilogue. There, he argues that China failed to dominate the modern world because it had no competition in its own region.
Diamond argues that China did not have to compete with any other countries in its region and so it did not push ahead. For example, it stopped sending treasure fleets out in 1433. If China had had competition, it would not have been able to do this because it would have feared that one of its rivals would have taken advantage. But since China had no rivals, it could do things like this without being hurt in the short term.
Diamond argues that China's unity and its domination of its area made it so that China did not need to push ahead in terms of technology, exploration, and other things that could have made it more powerful. This is why it never came to dominate the world.
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