Loudmouth,
The United States has and will continue to have, if it wills to, military superiority in the South China Sea. But it will not deter China from rewriting a military, political and strategic map there, because China knows how not to be deterred, because it knows that the Obama administration will not resort to its military power. Henry Kissinger said to a Japanese journalist that China would expand its sphere of influence by the process of osmosis.
"this (the Tribunal's award) will eventuate if other states are prepared to impose tangible costs on Beijing for non-compliance (John Lee/China's interests at stake in the South China Sea)."
http://www.eastasiaforum.org/2016/08/02/chinas-interests-at-stake-in-the-south-china-sea.

China has fishing and natural resources in the sea on its mind. But the unanimous opinion of Japanese experts is that China wants to send a nuclear submarine into the open Pacific Ocean, too. Once it is in the ocean, it is hard to detect it. A Chinese submarine cannot get into the ocean through the East China Sea without being detected by a Japanese or an American anti-Chinese submarine aircraft or boat. At present Chinese submarine cannot stealthly creep into the Pacific through the South China Sea, either.

According to a former Japanese defense minister, Morimoto, Japan had said to the United States for years what would entail if they allowed China to go on like that. To be continued.

"China is listening very carefully to American behavior." Yu Hua, a famous Chinese writer, said to a Japanese newspaper after reading a Japanese novel, The Snow Country, "We Chinese are always brawling at each other (unlike Japanese)."
They are intimidating each other in their brawls; they are threatening each other; they are trying to be frightening each other. But on account of this thousands-of-years of customary tactics or tactical custom, they are watching and calculating the power balance of what is safe and what is possible. Americans are being fooled.

"The sort of 'dialog' that the Chinese empire understands is the American show of determination. China will always say whatever to save its face. However, China is listening very carefully to American behavior. China will likely yield when/where it sees American determination (Fourierr's comment on Dialogue of the deaf: As China and America continue to talk past each other, Asia frets. http:www.economist.com/June 4th.

More evidence of China's willingness to be as flexible as possible with regards to Naval military power as demonstrated in this article about making commercial ship building industry factor in design guidelines for conversion to military operations if necessary > http://www.ibtimes.com/china-pla-navy-expansion-new-policy-mandates-commercial-ships-be-equipped-military-1978134?rel=rel1

Is this surprising? imo, no, not at all, kinda what I expect from them in their never ending pursuit of intimidating US world power and influence and for that matter anyone else who aspires to be potential world superpower.