I agree with your assessment of Chinese view towards weakness or perceived weakness. It's a little bit like how Germany viewed the U.S. after we sent 10,000 men wandering in the hills to find Pancho Villa, to no avail. The Germans perceived it as weakness and went ahead with their war plans.
Here is my swag on what is going to happen in Taiwan, posted on an earlier thread, "China Sets Condition for Resuming Talks with Taiwan".
1) The one-child policy has created a testosterone-rich generation the likes of which no one on earth has ever seen. China will have an entire army of what they call "little dictators" who have few prospects of finding women, and they will be very aggressively pushing their old-guard superiors for action on the Taiwan issue. The final straw will be that they'll be promised wives when they invade Taiwan.
2) Their army is as much as 200 Million strong, which was the size predicted in Revelation in the Bible, called "The Kings of the East." They can afford casualties in the range of 10 million, which is 5 times bigger than our army ever was. China has some unfinished business with Vietnam, having fought to a standoff in 1979. They might do a run through Vietnam first so that their troups are more battle-hardened and arrogant, knowing that the US didn't exactly win there. The added bonus is they get one of the largest warm water ports in the world.
3) Taiwan has never declared independence. It's not like the brave Estonians standing up to Russia when communism fell. They're like an impudent child claiming to have sovereignty over China. Their fatal miscalculation is that they know they'll need Americans to fight for them if they are in a war, but Americans will be reluctant to shed blood for an ally that didn't have the courage to declare independence until they were invaded on an "internal dispute". The chinese will hammer away at this in the press.
4) Chinese weapons policy has been to cycle through older generations of weaponry and stay about one generation behind the latest stuff. They sold their old silkworm missiles to the Iranians and used that money to upgrade their newer missiles, which are inferior to US missiles but they only need to be functional. The plan is to overwhelm defenses with superior numbers. No ship can stand up to 50 supersonic silkworm missiles aimed at it. They have similar tactics for other systems, such as anti aircraft missiles.
5) The chinese went up against Americans in Korea. They sent in 300 thousand infantry up against a much smaller American force. The key was that they only had rifles for about 1 in 5 personnel. So they would tell one to go as far as he could till he got shot, then the 2nd one would pick up the rifle & keep charging, and so on. Today, every one of those infantrymen has an automatic rifle. They are not as well equipped as their US counterparts but they can afford a lot of casualties. Vietnam, Iraq, Somalia and other engagements proved that you can't replace feet on the ground with air superiority. No matter how advanced the air force is nor how many smart bombs get dropped, the US won't be able to dislodge a standing army without sending in massive troup numbers and experiencing casualties. If our press made a big deal about losing 1000 US soldiers in Iraq, they'll have a heydey with 500 thousand casualties. Seeing the press reaction emboldens the Chinese.
6) China is building a blue-water navy including submarines. They might be able to achieve a standoff in the surrounding ocean, limiting the ability to resupply american troups while the chinese troups will pillage Taiwan. Once America loses 2 nuclear powered aircraft carriers (with the resulting radioactive plumes), the calculation is that the U.S. will lose stomach for more fighting.
7) The trick to defeating these strategies with minimal casualties will be special forces operating in Taiwan. They will need to have the ability to direct standoff weapons fire onto individual tanks and squad units in order to be effective.
8) The most likely outcome will be that Taiwan will be a giant pile of rubble. Casualties could run as high as WWII.
If China wins, it could be a Pyrrhic victory. If the US wins, it will take a whole generation to repair and rebuild.