Hey Jeff, see below for a direct quote from the Chinese foreign ministry website regarding China's actual reaction and word, that Bltizo kindly provided in a separate thread.
The Chinese Foreign Ministry has released a statement on that at noon.
The USS Lassen illegally entered waters near relevant islands and reefs of China's Nansha Islands without the permission of the Chinese government on October 27. Relevant authorities of the Chinese side monitored, followed and warned the US vessel. Relevant actions by the US naval vessel threatened China's sovereignty and security interests, put the personnel and facilities on the islands and reefs at risk and endangered regional peace and stability. The Chinese side hereby expresses strong opposition.
Foreign Minister Wang Yi also issued a solemn warning to the American side this morning when answering a journalist's question, urging the US not to stir up troubles.
The Chinese side has stressed on many occasions that China has indisputable sovereignty over the Nansha Islands and their adjacent waters. China's sovereignty and relevant rights over the South China Sea have been formed over the long course of history and upheld by successive Chinese governments.
Construction by the Chinese side on its own territory is in the realm of China's sovereignty. It does not target nor affect any country, and has not and will not have any impact on the freedom of navigation and over-flight in the South China Sea to which all countries are entitled under international law.
The Chinese side respects and safeguards the freedom of navigation and over-flight in the South China Sea to which all countries are entitled under international law. In fact, the Chinese side cares more about navigation safety and freedom in the South China Sea than any other countries including some country outside the region. Commercial shipping is different from military actions. We stand firmly against the harm caused by any country to China's sovereignty and security interests under the cloak of navigation and over-flight freedom. The Chinese side is steadfast in safeguarding its territorial sovereignty and security as well as lawful and justified maritime rights and interests. The Chinese side will firmly respond to any deliberate provocation by any country. We will keep a close eye on what is happening in the relevant waters and airspace and take all necessary measures as needed.
The Chinese side strongly urges the American side to take China's solemn representations seriously, put right mistakes, refrain from any dangerous or provocative actions detrimental to China's sovereignty and security interests, and honor its commitment of not taking sides on disputes over territorial sovereignty so as to avoid any further damage to China-US relations and regional peace and stability.
You will note that the overall tone is markedly different from what is being spun by the western press. Who cannot even use the pathetic excuse of lost in translation, since this is provided in plain English.
Note the most salient points, which I have highlighted in bold, which spells out exactly what the Chinese are upset and protesting about, and it has nothing to do with the 12nm limit.
China even explicitly stated there isn't a freedom of navigation issue, and stated that all nations are entitled to it in the SCS in that statement. Funny how no western media outlet managed to pick up on it.
As always, the Chinese are drawing a clear line between military and civilian actions, and that is the source and core of their beef with the US and the Lassen mission.
As far as the Chinese are concerned, the Lassen was on an explicitly military operation inside Chinese EEZ, thus would have gone beyond what is allowed under "innocent passage" under UNCLOS, hence when China feels it is illegal.
They also explicitly stated that they do not see the US FON mission as being about freedom of navigation at all, since China has never tried to restrict that in any way in the SCS, and rather sees the Lassen as being sent in to undermine and challenge Chinese sovereignty and control of those islands "under the cloak of navigation and over-flight freedom".
As any first year law student would know mens rea, or mental intent involved, is crucial in determining guilt or culpability in the eyes of the law. The exact the same act or action could result in vastly different legal outcomes based on the mens rea, or mental intend behind it.
Thus, when China is looking at the Lassen incident, it is considering the mens rea behind the mission, and since the Lassen was sent in on a specific mission targeted at Chinese interests inside what China considers to be its EEZ, then that is not "innocent passage" in Chinese eyes, and any honest legal scholar would have to agree that China has a certain point.
Had the Lassen been transiting the area and so happened to pass within 12nm of some of China's new islands, I don't think the Chinese government would have said anything.
A pure FON op should have been done that way. To first test if China was trying to impose any limits on freedom of navigation. Gather evidence one way or the other, and then react based on what China actually does rather than what the US thinks China might do.
By baselessly assuming China has or will impose such limitations without any evidence, and launch a mission specifically to "challenge" something that no one has any evidence was there in the first place, and turning it all into a media circus and high profile PR op, the US changed the very nature of the mission and forced China to react.
If that was what this mission was really about, then it was a success. If FON was the real point, then not only is this mission a total flop, it could potentially backfire badly.
China almost certainly wasn't originally planning on claiming 12nm territorial waters around new built islands which would not have qualified for it before construction started, since it would have not no basis to do so under international law, but it may well now decide to adopt a stance of deliberate ambiguity on the matter, neither confirming or denying it.
Thus the US would have ironically claimed the 12nm territorial waters for China by keep insisting that's what China is doing. Every time it sends warships within 12nm of the islands, China will protest based on the rationale highlighted above, but the US military and western media will instead claim that China is protesting because China considers that to be Chinese waters, and after a while, a new fact on the ground is established, and as soon as the US stops FON ops for whatever reason, it would be seen as an acquiescence to China's claims.