Perception problem in the South China Sea Dispute

The dispute between China and Philippines has gotten quite ugly in the past couple of months. It's quite a bad development for China when one considers how good the relationship was just 3 years ago. Internationally, China has been seen as the bully in this case pushing a smaller nation. I read this article on Times that put some good perspectives on this. If you want to know how Chinese leaders think, reading the quotes by Yang Yi is probably the most helpful.

“Eighty percent of the population wants us to use the military,” says Yang Yi, former director of the Institute for Strategic Studies at the National Defense University in Beijing. “They’re asking, ‘Why are we so weak? Why are we wasting money on our Navy if we are not going to use it?’ Outsiders really do not appreciate what is going on inside China.” Yang says there is a risk of miscalculation as China builds its military and asserts territorial claims in the region. Abroad, he says, China is seen as too assertive; but at home, it’s just the opposite.

Based on my time on Chinese forums, I can say that what Yang says here is 100% true. The question is then why do Chinese people think that Chinese leadership is weak. You have to consider 3 things here:

1. Chinese kids are taught from a very young age that the majority of South China Sea are part of China. If you have ever taken a look at maps of China issued in China, you would see what I mean.
2. A renewed self-confidence and nationalism in China in the recent years (especially since 2009)
3. In the past 150 years, Chinese leaders have been generally speaking very weak in dealing with foreign intrusions. So regardless of how legitimate Chinese claims over South China Sea is, Chinese public will connect it to weakness of past Chinese leadership.

So, the Chinese government has basically created a monster that it has trouble containing. When the Chinese public looks at this dispute in such contrasting light to other publics around China, it's hard to see how Chinese government can navigate through this without looking weak to its own population.