Repair-It

If Chinese students read or study more than American students, why is it that America still leads the Chinese in almost all aspects of life - technology, entrepreneurs, etc?

This is an excellent question. I'll answer you in the following aspects.

Education

You assumed Chinese students read and study more than American ones do. Education is not only about read books and study knowledges, it's also about thinking and question everything you see, solve problems you are interested in.

Chinese students start learning very complicated math skills since we're only around 9 years old. In traditional education system, students here study everything for only one purpose, take exams.

That means, most students just recite what they learned other than thinking what they're learning, study how to get a high score in exams other than considering how they can use what they learned to solve interesting problems.

Yes we spend plenty time in schools, after school, almost every student needs to attend cram schools to continue studying how to get a higher score in exams.

This horrible situation lasted for several generations in China, I spent a lot of time playing games and exploring interesting hobbies when I was in middle school, and guess what, I was seen as a bad student.

Chinese students' time is occupied all kinds of lessons and homework. There is not room for them to explore what they like and think too much. Most of them get used to wait other people to tell them what to do.

Meanwhile, we still have many brilliant students here in China, they're smart, creative and self-motivated. Guess where they choose to develop their careers? Yes, they go abroad, most of them, like Tony Li mentioned in his answer, top Chinese talents are working in places like Cupertino, Palo Alto, New York, London, San Francisco, Boston, you name it.

Politics

I do not have to talk about what if we have democracy in our country will make what kind of difference here. There is one point enough to illustrate how politics affected the development of China.

Great Firewall of China (GFW).

It's the reason most Chinese can't access Google, Facebook, Twitter and numerous important internet services here. Imagine your daily life without Google and there is no satisfactory alternative solution.

GFW reduces everyone's work efficiency and stand in the way between you and utterly useful information.

It's absolutely impossible for China to lead in life-technology and entrepreneurship under this circumstance.

History

Computer and Internet are two greatest inventions in 20th century and mother language of these technologies is English. One of my friends is kind of the earliest BSD project developer when he was studying in Berkeley. He is the very first person introduced Unix operating system to China back to 1979. Very few people then understand what it is and what it capable of.

If you know a little history about the computer and open source movement, you'll see very few Chinese people took part in making this important history. The major language we're using in the tech world is still English. It takes time to translate documentations and books to Chinese but the evolution of technology is ridiculously fast.

Not until 2002 do most Chinese families have personal computers. We're way behind U.S.

Conclusion

Chinese students lack three very important things:
•Time - to explore, to think, to get inspired
•Utilities - to learn knowledge, to access interesting information
•Fluent English skill - to fit in global communities, to understand western culture
3 Idiots (2009 movie) is an excellent movie described the education problem we have in both China and India, but most Indian can speak very fluent English despite their accents.

Look how big difference it made in technology world, you can see Indian take charge of important positions in big player like Google but very few Chinese made it.