http://www.economist.com/news/leaders/21590930-chinas-new-ai...
They are considered the 3rd most powerful military.
What is the risk?
The risk is, if the Chinese pick a naval fight and their navy gets pummeled, it's a PR disaster. That's a risk for the leadership, not so much for the country.
China's leaders are smart and they see that issue. I think that is one of the reasons they want to increase land trade through central asia.
This seems to still be China's approach, at least in this area.
And they also destroy everything in their path: https://en.wikipedia.org/wiki/Old_Summer_Palace
How does a military conflict between China and US even look like, I always thought it immediately escalates to nuclear war.
Read that last week, it's a about a future war between the US and the Chinese, it's bordering on sci-fi but interesting nonetheless and a good read.
Interestingly it posits a future where the US economy is in major trouble as the reason why the US Navy has been severely downsized, they had to do that since the current US Navy vs the current PLA Navy while horrific wouldn't be remotely a fair fight.
News for you:
http://news.yahoo.com/u-airlines-advised-china-flight-plans-...
An actual combat that results in Chinese loss would be detrimental to the continuity of Xi's party and the Communist Party itself. The risk is far too great for the small gain it gets. Chinese leadership operates on a cost/benefit analysis, I don't think anything has changed.
So the only logical conclusion is that Xi, along with his anti-corruption campaign to take out his foes, is using brinkmanship to further his popularity and distract people from internal problems that could lead to massive unrest. Economic downturn would certainly be a threat and war drumming has been a common political tool used by many different countries at different points in history.
A military conflict that would be launched by China so far away from it's coastline makes no sense where US has dozens of nearby bases in different countries and logistic support on it's own and from host countries to sustain a prolonged naval warfare. If there was a war, China should pick it's coastlines where it has anti-access/area denial weapons (allegedly) and opposing force would not risk their assets. It would be a nightmare in terms of logistics for PLAN if they did launch some provocation so far away from the mainland. The island building is a clever way to provoke without risking it's military.