Amisdt the recent purging of Bo Xilai and the leadership change, it is highly unlikely the CCP can mobilize any troops to the island. Chinese will have to resort to diplomatic negotiations to regain the territory.
IMO, Chinese government is boxed into the cornor and there is no other choice if they don't react. Yes, the economy will be hurted. But the political risk is a much bigger concern than anything else. I don't think CCP will risk that.
It looks to me that Japan has also put itself into a no-turning-back situation.