Rather China fell behind because:
If china had retained its multiple warring kingdoms period along with the technology and openness of the Tang and early Ming dynasties, they would have gone very far.
China never remained divided into nation-states, and divided the Earth into familiar and foreign. There was a focus on ruling the familiar neighboring states (even the writing system is geared to making sure the same message can be read in multiple languages, a remarkable accomplishment) and minimizing contact with the outside world. And as you said, a centralized state -- that means, whatever puts the Emperor in a good light and keeps his ass fat and happy, is considered good. No upward mobility is permitted. Look at the pretty fireworks? Here's what they look like coming from the barrel of a cannon of a European man-o-war.
The British and Portuguese tried to crack into the Chinese market, but even then it wasn't a free trade zone. The British concern over the trade imbalance (mostly due to their newfound addiction to tea) led to the introduction of opium to the Chinese market, which in a very real way led to the shredding of the imperial polity. Moving tea production to British India disrupted the economy. Exposure to western political ideas ushered in the diasters of the 20th century.