1) We let China have steel, shoes, textiles, apparel, computers, electronics, televisions, most of the drug supply chain, most healthcare PPE, and utterly countless other examples. So you are wrong, late. It does get dumber than that. A lot dumber.
2) We don't know, or you don't know? The Chinese try to hack my servers all the time. A simple trace route proves that.
3) Isn't that a contradiction in terms? If it's regulated, is it still free?
1) That's the past. We need to invest in the future.
2) China's spying is mostly about business. Their approach is usually low cost and low tech. They are way behind the Russkies.
3) No, the Modern world is a package deal. Regulation has been part of that package since the 1800s. What you want is mercantilism, which is pre-capitalist. So you need a time machine to take you back at least 200 years, but more would be better.