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React retains state when the same component is repeatedly rendered in the same location because React uses a virtual DOM to keep track of changes in the component. When the same component is re-rendered, React only makes necessary updates to the virtual DOM, and the state is preserved. This approach improves the performance and speed of React applications since it reduces the need for unnecessary re-renders and updates. Additionally, React also uses the concept of reconciliation to optimize the rendering process, which enables it to retain the state of a component when it is repeatedly rendered.