BEIJING China's leadership is resisting pressure from elements within the military for a more forceful response to an international court ruling against Beijing's claims in the South China Sea, sources said, wary of provoking a clash with the United States.
China refused to participate in the case overseen by the Permanent Court of Arbitration in The Hague.
It denounced the emphatic July 12 ruling in favor of the Philippines as a farce that had no legal basis and part of an anti-China plot cooked up in Washington.
The ruling has been followed in China by a wave of nationalist sentiment, scattered protests and strongly worded editorials in state media.
So far, Beijing has not shown any sign of wanting to take stronger action. Instead, it has called for a peaceful resolution through talks at the same time as promising to defend Chinese territory.
But some elements within China's increasingly confident military are pushing for a stronger - potentially armed - response aimed at the United States and its regional allies, according to interviews with four sources with close military and leadership ties.
"The People's Liberation Army is ready," one source with ties to the military told Reuters.
"We should go in and give them a bloody nose like Deng Xiaoping did to Vietnam in 1979," the source said, referring to China's brief invasion of Vietnam to punish Hanoi for forcing Beijing's ally the Khmer Rouge from power in Cambodia.
The sources requested anonymity because they were not authorized to speak to the media.
President Xi Jinping has assiduously courted and thoroughly cemented his leadership over the PLA and faces no serious challenges to his command.
While he is overseeing sweeping military reforms to improve the PLA's ability to win wars, he has said China needs a stable external environment as it deals with its own development issues, including a slowing economy. And few people expect any significant move ahead of Xi's hosting of a G20 summit in September.
But the hardened response to The Hague ruling from some elements of the military increases the risk that any provocative or inadvertent incidents in the South China Sea could escalate into a more serious clash.
Another source with ties to the leadership described the mood in the PLA as hawkish.
"The United States will do what it has to do. We will do what we have to do," the source said. "The entire military side has been hardened. It was a huge loss of face," he said, declining further comment.
Chinese Defence Ministry spokesman Yang Yujun, asked whether the PLA was pushing for a stronger response, repeated that the armed forces would resolutely defend China's territory and maritime rights, and peace and stability, while dealing with any threats or challenges.
Retired military officers and army-linked academics have pushed home a strongly martial message.
"The Chinese military will step up and fight hard and China will never submit to any country on matters of sovereignty," Liang Fang, a professor at the military-run National Defence University, wrote on his Weibo microblog about the ruling.
It is not clear exactly what steps military hardliners are considering.
Much attention has been focused around the potential establishment of an Air Defence Identification Zone (ADIZ) for the South China Sea, which would require international aircraft to identify themselves to Chinese authorities.
Other options floated by those linked to the PLA include putting missiles on bombers patrolling the South China Sea capable of hitting targets in the Philippines or Vietnam.
Yue Gang, a retired colonel, said China's announcement promising regular air patrols over the region showed it was seeking to deny the U.S. air superiority afforded by aircraft carriers. China should be confident enough to provoke an incident and drive the U.S. out, he added.
"China is not intimidated by U.S. carriers and is brave enough to touch off an inadvertent confrontation," Yue wrote on his Weibo account.
China's military build-up in the region looks set to quicken regardless of any action.
"We must make preparations for a long-term fight and take this as a turning point in our South China Sea military strategy," Li Jinming of the South China Sea Institute at China's Xiamen University wrote in the Chinese academic journal Southeast Asian Studies.
WARY OF CLASH
Despite the saber rattling, there have been no firm military moves that could cause an escalation of tensions. Diplomats and sources said the Chinese leadership was well aware of the dangers of a clash.
"They're on the back foot. They're very worried by the international reaction," said one senior Beijing-based diplomat, citing conversations with Chinese officials.
"They are genuine about wanting to get talks back on track. The leadership will have to think long and hard about where to go next."
Within China's armed forces there is a recognition that China would come off worst in a face-off with the United States.
"Our navy cannot take on the Americans. We do not have that level of technology yet. The only people who would suffer would be ordinary Chinese," said the source with ties to the military.
Those voices appeared to have the upper hand for now, the source said, pointing to a realization that the 1979 border war with Vietnam did not go as well for China as the propaganda machine would like people to believe.
Even setting up an ADIZ, like the one Beijing set up over the East China Sea in 2013 to anger from the United States, Japan and others, would be difficult to enforce given the distance from the mainland.
China has repeatedly said it has the right to set up an ADIZ but that the decision depends on the level of threat it faces.
A second source with leadership ties put it bluntly: "War is unlikely".
"But we will continue to conduct military exercises," the source said. "(We) expect U.S. naval vessels to continue to come," and "miscalculation cannot be ruled out".
Foreign Minister Wang Yi has stressed the importance of dialogue, saying it now was the time to return things to the "right track" and to "turn the page" on the ruling.
The United States has responded positively to these overtures, sending U.S. National Security Adviser Susan Rice to China this week with a call for calm.
Washington is also using quiet diplomacy to persuade other regional players not to move aggressively to capitalize on the ruling.
China has been angered by U.S. freedom of navigation patrols in the South China Sea, but its forces have responded only by shadowing U.S. vessels and warning them, showing China's unwillingness to goad the U.S. military unnecessarily, according to Western and Asian diplomats.
China is also wary of any incident overshadowing the G20 summit in Hangzhou in September, the highlight of this year's diplomatic calendar for Xi when he will be host to the leaders of most of the world’s economically most powerful countries, the sources said.
The Beijing-based diplomat said it was more likely China would choose the period between the end of the G20 and the U.S. presidential election in November to make any move.
"But that is a misjudgment if China thinks the United States will just sit back and do nothing," the diplomat said.
(Editing by Lincoln Feast)