China's SMIC is already making 5nm chips for Huawei using the SAQP process on DUV machines. Their 5nm chip is purportedly more efficient than TSMC's 5nm chip of 3 years ago.
But China needs EUV to go below 5nm, and ASML is barred by the US from selling its EUV lithograph machine to China. The key is: can China develop its own EUV technology from scratch (very, very difficult)... or can it find a way to manufacture ultra-thin chips using alternative technology (more feasible)?
However it turns out, China accounts for more than 50% of the world's legacy chip sales, and has enough DUV machines to continue churning out these chips down to 5nm. But to make major inroads into AI, the Chinese will have to find a way to make more powerful chips. Soon.