A minimum deterrence strategy works when the regime has nothing to lose, and the country was poor, which the main adversary was many times more powerful materially and impossible to defeat in a conventional war. North Korea today would be a good fit for adopting a minimum deterrence strategy (which it has achieved since late 2017). In other words, minimum deterrence strategy was equivalent to a nation-wide suicide bombing campaign with the hope that by detonating itself, the much weaker defender could at least cripple the much stronger foe. However, China has much to lose today, and if I were decision makers in Beijing, one of the questions in my mind would be what if my adversary were to use low-yield, radiation-enhanced tactical nuclear weapons first with the hope of "escalating to de-escalate," especially in a scenario when an enemy (think Trump or Putin, practitioners of brinkmanship) were to completely annihilate one single Chinese naval port city (like Qingdao, Dalian, or Zhanjiang) and cause more than a million casualty, completely incinerating all industrial capacities of that city as well. And subsequently warn me not to escalate, or expect nastiers sneak attacks short of all-out nuclear exchange.
Exactly. China doesn't have the means and nor should it pursue this tactical nuke brinkmanship game because it drains resources and muddies the water when a superior solution is right there. All China needs to do is put into law that any WMD strike on it, however limited and "tactical" would be responded to with strategic weapons with the aim of ending the fight.
This is what Russia has in place. The US would never consider a tactical nuke on Russia because Russia would send several dozen megaton yield missiles just to Washington and then ask if the Americans would like to play on.
China needs more warheads and more delivery systems with reach at least DF-31 range. They probably already have a substantially decent amount.
Only the US considers first use and would potentially do it. I'd rather China scrap NFU and actually also commit to first use on threatening fleets. If they don't like having fleets nuked, they can escalate and everyone dies or they can simply not use their fleets in violence. It's very simple. I'd wager that if China ever declares NFU scrapped and warns that underwater nukes and anti ship/fleet nuclear weapons will be used if US or allied fleets ever start a war, they will never even consider a conventional war on the sea.
Yields today have almost no restriction and Tsar bomb level (actual designed yield not detonated) are a walk in the park now. They just require more material. They can guarantee that not a single PLAN or PLAAF asset has to move an inch to sink entire fleets. If they want to escalate with nuclear exchange, that's insane because the choice is binary - die or don't use fleet against China even in conventional confrontation. Every sane leader and responsible person would choose not to go to war with China instead of risking nuclear MAD.
The flip side of this policy is that China itself will need to be accommodating somewhat as well wrt SCS and Taiwan. It doesn't mean they give up entirely on Taiwan since that is sovereignty but islands in SCS claims may be scaled back to be more accommodating and provide an easier bargain. The current situation risks PLAN engaging in conventional fight with USN and all the uncertainty within.