Pouring eight times the amount of money they are into our military. Whether it's producing the results we need is one thing, but we're certainly putting enough money into R&D and our military technology base.
Half of the DOD budget is pay and benefits for the personnel. So that doesn't count, really. Our military is the best paid in the world.
Of the other half...our technology base? I don't know about other areas, but our aerospace industrial base is headed for some hard times. And the big budget cuts to fund health control haven't happened yet, but I'm certain they will.
The Chinese fought us to a standstill on the Korean Peninsula in 1952-53. They're a hell of a lot closer to us technologically now than they were then. Remember, probably half the world's electronics are manufactured in China.
The biggest limitation the Chinese military faces is mobility. The People's Liberation Army Air Force lacks the airlift capability that the USAF or even the old Soviet Air Force had...as far as I know (lack of airlift is one of the things that really hampered the Soviets in Afghanistan). (I will go way out on a limb and say this could be a by-product of tying their air force down to generals who were infantry or tank commanders. Their Navy, the PLAN, is in a similar predicament.)
As for sealift capability, I've heard analysts who are paid a lot of money say they have none. I just look at the Chinese industrial complex and wonder how many freighters full of Chinese goods are headed around the world every day; converting those for troop/equipment carriage would be a trivial task.
I'm not saying they could mount an invasion of the US or anything. I am saying that if we were to go to war with China right now we might be shocked at how tough the fight is for us. Right now, China is on about the same level on the world stage as the United States was in the 19th Century. The US today is akin to the Great Britain of the 19th century.
I don't think that bodes especially well for us.
On the other hand, I believe a war with China is entirely avoidable. For now, anyway.
Anyway...as for the Type 95, I've heard improvements are underway. One of the problems with it apparently was that the safety/selector switch was terribly located, and couldn't be reached without breaking the firing grip. I read that the designers said this was a result of the limited R&D time they had. They've also developed and fielded the Type 03 assualt rifle, a complimentary system in 5.8mm that's of conventional layout.