You have a better read of Chinese statements and meaning than I do and I will defer to your understanding for the moment.
I mean, I'm just applying my logic to it, your own logic might lead yourself to a different but possibly equally valid conclusion.
But based on what has been said, I think it would be very difficult to believe that the Admiral was threatening war, especially as both sides must have an intimate appreciation that continuing these encounters may well accidentally lead to a shooting war, and both sides know the consequences of such a war which neither really wants.
I am somewhat resigned to the notion that China is firmed on its strategic policy towards the SCS and short of a war will not change that equation. The idea of caving is too strong a term in my view but given how assertive China had been in the past two years with its activities in the SCS, we are starting to see more tangibly the reaction and push back from the other side.
My read is that China knows its position is weak on international law but by pursuing ambiguity it intends to gain as much ground as possible before the other side can react in a firm and coherent manner. Once the smoke screen is cleared, it will limit its options from which then China consolidate its gains and recalibrate its next path albeit in a more restricted sense.
I think that is about right. I'd like to think that there was a period a decade or more ago when all sides were more agreeable, but the nature of these disagreements is that when one side makes a move which it believes is benign, the other side perceives it as a provocation or escalation and then in turn escalates in response. The first side considers the escalation to be unwarranted and the cycle thus begins.