Remember no one lives on these islands that we are talking about. Except for the Islands China took had a small number of fishermen on those islands.
The island dispute is not' about living on the islands, but about the resources that are granted as exclusive economic zones if you have ownership on the island, such as OIL, etc.
Again, you're not understanding the basic of Chinese history and culture. As far as the Chinese people is concerned, Taiwan is part of China. Even if Chiang Kai Shek had won against the Communists, it will stil claim Taiwan is part of China. See what I am saying?
If you're talking about communist governmen tin China, note that the same government in China today isn't the same as during the Mao days. It's still authoritarian, but then again, so is Singapore and you don't hear complaints about that from the US.