Like you, I don't think it is in China's interest to fight a war with us. China is trying to come into the world as a whole. However I do believe that China could absorb more losses than we can inflict (short of nuclear) and laugh at us. This imbalance of the sexes makes it even more so. It might destroy them financially but for the vast majority of China nothing would drastically change. They know it and know we know it. We need to remember this when dealing with them. They have a lot to lose but they are willing to lose it. They think of time in a way we don't or can't.
T.S. was a PR nightmare but it proves one thing. China will do whatever is necessary to maintain control. They are not stupid however. Their leaders are very astute and learn from their mistakes. They would do it with much more finesse now but the end result would be the same. They weren't prepared for the world press then. They are now.
I would love to see China. I think it would give one a whole new view on the world.
That aside, to call the TS massacre a PR nightmare is to say the least. They could never get away with such a move again. Such an action now would cost them their entire economy as all foreign investment would more than likely cease to exist or at least make a mass exodus.
Our main threat from China comes in educating their young and allowing them to maintain such an edge on our economy. They are without a doubt following Sun Tzu by the book. If you like to keep up on politics with China and the US, I would suggest a book by Richard Bernstein and Ross H. Munro called "The coming Conflict with China". It is a most impressive read and it solely relies on the facts that exist.
Ive spent quite a bit of time there being that my fiance is from one of the northern provinces there where her uncle holds a fairly high position in the government. Upon completion of my studies at the University I plan to spend a year teaching English over there in order to bring my speaking ability of Chinese up to better speed. That is if I dont return to the Marines before hand.
You certainly make a valid point too about their ability to handle the press now. One of my good friends in Beijing is a PR rep and they have certainly become quite the little spin masters.
Regards!
EOTS