Why, according to Guns, Germs, and Steel did China lose its technological advantage to Europe?Should be found in the epilogue

The answer to this, according to Diamond, has to do with
the fact that China dominated its area whereas no European country was able to
completely dominate Europe.  This led to competition between the various European
countries, a competition which led to technological
growth.

In China, for example, the government could stop
using mechanical devices in the late 15th century.  When they did this, it did not hurt
them because there was no country that could defeat them by using mechanical devices to
get rich or powerful.  Contrast this with the situation in Europe.  If a country
rejected mechanical devices, it would be destroyed (militarily or economically) by its
neighbors who would use the devices to get ahead.  European countries could not,
therefore, afford to turn their backs on technology the way that China could. 
Similarly, it was in the best interests of the European countries to try to push ahead
with new technologies to try to gain advantages.  China did not have to do
this.

So, China fell behind (Diamond says) because it had
no competition.  European countries had to compete fiercely to keep up with one
another.  This led Europe to move ahead of China in technology.