They could, if they played the long game: "... the only way that China is going to break through the 5nm barrier is by going back not just a few years but a few decades: Shanghai Micro Electronics Equipment (SMEE), China’s answer to ASML, is building fully home-grown lithography machines using krypton fluoride lasers (Krf); this is previous generation DUV — first introduced around the turn of the century — using wavelengths of 248nm (current DUV processes use argon fluoride lasers (Arf) to achieve 193nm wavelengths). What SMEE specifically and China broadly needs to do is move down the learning curve for lithography. SMEE needs to learn how to use Arf, then immersion, and then EUV. It doesn’t need to take 20 years, either: while ASML needed to invent everything, SMEE has the luxury of already knowing what is possible; the same thing applies to every other part of the semiconductor value chain.
This, then, gets at why this PR cycle could be bad for China: the Mate 60 is a short-term propaganda victory that threatens to distract leaders who don’t understand semiconductors from facing up to and fully investing in the long road to semiconductor independence; it’s harder to accept that it might take 15 years when you have 7nm capability in hand right now."
https://stratechery.com/2023/the-huawei-mate-60-pro-7nm-back...
Unfortunately, Xi is a dictator. Dictators don't have the luxury of playing long games.