> have to release free open source models because they distill from OpenAI and Anthropic

They dont really have to though, they just need to be good enough and cheaper (even if distilled). That being said, it is true they are gaining a lot of visibility (specially Qwen) because of being open-source(weight).

Hardware-wise they seem they will catch-up in 3-5 years (Nvidia is kind of irrelevant, what matters is the node).

I highly doubt they can catch up in 3-5 years to Nvidia.

Chips take about 3 years to design. Do you think China will have Feymann-level AI systems in 3 years?

I think in 3 years, they'll have H200-equivalent at home.