I suspect that they're getting so exercised about it because China isn't very "resource rich" (they've started buying up tracts of Africa for example to grow crops for their sizable population for example) and, by all accounts, this sea might be rich in oil.
Anyway I bring this up because I was watching Dialogue yesterday when they reported the "island crisis." It's the Chinese equivalent of Newsnight or 60 minutes, without the challenging questions for the "party." As I watched, I was waiting for someone, anyone, to explain why people thought they owned the islands. It didn't come. I knew it wouldn't come when Yang Rui, the presenter (the CCTV-9's equivalent of Jeremy Paxman or Bob Schieffer) asked (and I'm not kidding) "The island is 160 miles off the coast of Vietnam, 100 miles off the coast of the coast of the Philippines and over 1000 miles off the coast of China. How can we hope to defend it?" Note, the question wasn't "How can we claim the island as ours given it's in their territorial waters?" and given that it was asked with such a straight face, I have to wonder if Yang is really a "puppet of the party" for just doesn't get it.