Trying to get it concise isn't easy. There is a cultural, shared definition. Fantasy simply isn't everything that involves fantasy. It has some specific ingredients. It seems to me that the fantastic element in Fantasy is the setting/environment/world where the characters operate, but that setting is not the important part. The story is about the characters, who usually behave realistic (given their options). It also tends to have a historical nature, although not accurate.

In sci-fi, there's often an (hypothetical) future setting/environment/world involved, but that doesn't really define the difference. The important part in sci-fi is how the events evolve in and how the characters react to and interact with that world, and how that particular definition of that world determines the outcome. The fantasy part is the main ingredient. It's a thought-experiment.

Chiang sets up a world, and his interest is in how that world affects "us" (the characters). It's not about the "arch" of the characters, but it's about the effect the world has on them.