China....In many ways we have helped to create a monster...
China has little to fear, in any way...They are now a super power militarily and economically... They hold a lot of our debt and they are major producers for our corporations...They have, not 'the' upper hand, but a hand its hard to bet against...
In many ways they could care less what anyone thinks now...
Corporate America (and our gov) helped build them up,,,and now we are in the position we need to make alliances..
In the China sea as you point out, they built those Islands and are daring anyone to do anything about it......Not so unlike Russia with Crimea, Ukraine and Georgia..
Hong Kong is now gone for all practical purposes....Maybe even Taiwan next...
We can only do so much with the leverage we have, they have their own leverage now...