China suffered a humiliating loss in arbitration, and now it's more dangerous than ever

China just suffered a lopsided, humiliating, and very public defeat when the Permanent Court of Arbitration ruled against its nine-dash line claims in the South China sea.

The ruling prompted widespread anti-American sentiment and demonstrations across the country, and perhaps motivated the world's most populous country to make an extremely dangerous, destabilizing move.

The ruling puts the Chinese Communist Party in an awkward position, as China has invested heavily in its South China Sea reclamation project, the modernization of its navy, and an overall push to become a regional hegemon.

The CCP pushes a "China dream" narrative, which involves China rising as a world power following its "century of humiliation," according to Malcolm Davis of the Australian Strategic Policy Institute.

To back down from any of its positions would make the CCP appear weak and ineffective before a newly energized nationalist movement, and thusly China can conceivably go forward in only two ways without significantly damaging its legitimacy.

Potentially, China could leverage its soft power. As the world's second-largest economy and a major trade partner with Japan, the Philippines, and the US, there is some room for negotiation. But China, with its introverted, authoritarian government, is notoriously weak in the soft power department.

Trying to attract the support of the newly appointed Philippine President Rodrigo Duerte seems an especially dubious prospect, as he was elected on a largely nationalist platform. And many Filipinos view China as an invasive power because of the nation's competing claims on the Scarborough Shoal and the bullying actions of Beijing's navy in those waters.

That leaves one option for the CCP - flexing its hard, or military, power.

So far, in the South China Sea, China has enjoyed enormous success in employing a "salami-slicing" method of incrementally militarizing the region without taking any step so bold as to prompt a response from the US.

China could continue along this incremental course, increasing naval patrols of the South China Sea shoals and islands, as well as by continuing to establish radar installations and military-grade runways. Or China could declare an Air Defense Identification Zone, similar to its actions following the 2013 dispute with Japan over the Senkaku/Diaoyu Islands.

Though some observers doubt that China could credibly keep out the US' mature military, the US Naval Institute recent published an article stating that because of China's improved fighters and bombers, as well as its burgeoning network of radar outposts in the South China Sea, it pretty much could establish such a zone.

But the most dangerous and aggressive move that China could pursue would be to directly defy The Hague's ruling and go right ahead with building out the Scarborough Shoal - a move Obama has already warned Chinese President Xi Jinping about.

Developing the Scarborough Shoal, which is 150 miles from Manila and clearly in the Philippines' exclusive economic zone, would represent a brazen break with international law and courtesy. This would also conceivably out Chinese forces within a few hundred miles of important US military and naval bases like the Subic Bay.

The US Navy patrols China's claims in the region regularly, skirting just outside of its territorial waters with elements from the USS Ronald Reagan carrier strike group, which also regularly perform freedom of navigation operations, or FONOPS, in the area.

If China moved forward on the Scarborough Shoal, it would dash any attempts at branding its expansion as peaceful, and it would further isolate Beijing from its neighbors.

The move could also force the US to intervene for its own interests, as well as on the behalf of the Philippines, whose navy is comparatively weak.

Furthermore, China has repeatedly made it clear that it has no intentions of respecting The Hague's ruling or ceasing its island-building activities, going as far to warn that US FONOPS in the region could end in "disaster."

With the US preoccupied with a heated election and US military power stretched thin across the world, China's apparent will to ignore international law and order to seize a vital shipping corridor in the South China Sea proves that the Middle Kingdom is now more dangerous than ever.

NOW WATCH: The US and 25 other nations are working together in the world's largest maritime exercise

Please enable Javascript to watch this video