Ties between China and Japan have been strained for months by the dispute over the islands in the East China Sea, called the Diaoyu by China and the Senkaku by Japan. The islands are currently under Japanese administrative control, but China claims they have been part of its territory since ancient times.
Now the tension has been ratcheted even higher after China unilaterally declared a new airspace defence zone over the islands. The Americans have responded by pledging their support for Japan.
Given the effective level of military deterrence on all sides of this particular dispute, the great economic cost and opportunity cost of any kind of conflict … and the fact that China has in last few years attempted to avoid escalation ... it does seem to suggest that the entire strategy is one of conflict management rather than escalation or resolution of any form.
Senior US administration officials said China's decision raises serious concerns about its intentions. And, in a show of support for Japan, two US B-52 bombers deliberately flew over the islands without notifying China.
Thirty years of economic boom have made China the world's second-largest economy and with that growth, it has sought to flex its muscles and extend its regional influence.
It openly sided with Russia and opposed any military intervention in Syria, vetoing three UN resolutions. And, despite various attempts by the US to persuade China to sanction Iran, China remained the only major player active in Tehran that refused to adhere to any international restrictions.
In addition to the island dispute with Japan, China has also engaged in sovereignty issues with Taiwan, Vietnam, the Philippines and Malaysia.
The relationship between the US and China has been under strain of late. In 2011, the US announced a $5.9bn arms deal with Taiwan, prompting an angry response from China.
That same year, President Obama's high-profile 'pivot' towards Asia was viewed by China as a military strategy to contain its growing influence. And monetary policy continues to be a source of dispute, with the US arguing that China has deliberately undervalued its currency.
So what are China's intentions by establishing the military air defence zone? Is Washington trying to limit Beijing's power? And will they find a way to defuse the crisis?
To discuss this, Inside Story, with presenter Shiulie Ghosh, is joined by guests: Peter Ford, the bureau chief of the Christian Science Monitor in China; Christian le Miere, a senior fellow for naval forces and maritime security at the International Institute for Strategic Studies; and Richard Weitz, a senior fellow and the director of the Center for Political-Military Analysis at the Hudson Institute.
"The whole dispute with Japan over the islands ... has raised nationalist feelings for the last year or so since the crisis broke out, and when the government made this announcement on Saturday it was greeted with a good deal of enthusiasm ... by nationalist voices in China. But nationalism is a difficult force to control and while it may be that the government is keen on using and harnessing it, even the People's Liberation Army daily said, in an editorial over the weekend, before we knew that the Americans have flown the airplanes into the zone, that unless China can actually enforce this idea ... unless they can actually make people do what they asked them to do, this is an 'armchair strategy' and I think this is a risk that the government does run."
Peter Ford, Christian Science Monitor's China bureau chief