China as it stands at the moment is a porcelain (or perhaps terracotta?
) state, it looks beautiful and it looks impressive, but if you kick it hard enough it will fall apart (yes, I know Hitler said the same about the Soviet Union). The Chinese economy is linked massively to trade, it's thrived on being the cheapest producer of...well...just about anything. However, global trade has slowed since the economic crisis, and whilst China was originally sheltered from it, they are now feeling the bite. Massive housing projects lie empty, growth is down and political corruption and turmoil is a constant problem.
The aim of the new five year plan is, I do believe, to try to balance out the Chinese economy, by investing internally so that the Chinese people buy the goods that China currently exports, so that the PRC is not so dependent on exporting goods to other countries to survive. However, whether or not the PRC has done this in time is debatable.
The PRC also has a huge social problem, there is a massive divide between the societies in the coastal cities and the societies in the rural villages. In the cities you have TV, internet, shops and clean (ish) water. In the rural villages, you have the village pump, the village cow and if you're lucky, a radio. Naturally this means that most young Chinese head for the cities at the first opportunity, which means eventually there's going to be a rural crisis of food, and a urban crisis of living space.
There are lots of problems facing the PRC in the next few decades, and an armed conflict is only going to make them worse, which is why I think the PRC will continue to use soft power to maneuver itself into a favourable position in Asia. It already has the edge over many of its neighbours, Japan included, so why would it need to resort to armed conflict?
No, this whole island debacle is merely to keep the peoples minds off the economy and the political problems that have beset the PRC, after all, the Chinese version of twitter has censored searches for 'Xi Jinping' at the moment, but you can bet they haven't censored searches for 'Diaoyu'
It's a bit like Argentina at the moment with the Falklands, a lot of hot air and noise. Perhaps there might be a small clash between coast guard vessels in the near future, I can see the PRC letting it escalate that far, but in terms of an actual full on armed conflict with Japan...nah, ain't going to happen, not in this decade anyway.
In other news, the American Chinese in San Francisco have apparently got into the swing of things with their own protests in support of the PRC, a 21 year old man has been killed by surging mobs in China, and another man faces a lifetime of paralysis after he was dragged from his Japanese made car and beaten by an angry mob. However, the mood online in China is beginning to turn slightly as some Chinese question the wisdom of destroying their own cities in protest over some rocks...although they do not question the rocks true Chinese heritage.