There was a time when China tried hard to convince the world its rise is peaceful. That pretense was abandoned seven years ago when in the wake of Great Recession China thought its time had come to claim its place as controlling "all under heaven," or tianxia in Asia.

Like all great powers in history, China's emergence is accompanied not just by military expansion but also assertion of its own law. In China’s narrative, the rise is still peaceful. The nation built military installations on reefs and rocks in the South China Sea simply because China claims to own them from time immemorial.

As Hu Shijin, editor-in-chief ofGlobal Times, told Quartz in a recent interview. “We can’t lose these islands.” Fighting the Philippines arbitration case in court could result in defeat, and did, a risk China wanted to avoid. China decided not to participate in the proceedings or accept any decision of the arbitral tribunal set up under the UN Convention on the Law of the Sea. From the Chinese standpoint, the South China Sea is a core interest. There can be no backing down.

To justify its position on this and other issues, China creates an imagined universe where, in the words of Bill Hayton, the BBC specialist on the South China Sea, “They start from the position that everything China does is virtuous and correct and therefore that anyone who disagrees must be wrong.”

What China thinks is right must be the law. The day the tribunal’s decision was made public, Chinese Foreign Minister Wang Yi called it a “farce” and said that China, by refusing to accept the ruling, was “upholding international rule of law.”

China has emerged as the dominant power. China’s neighbors in Southeast Asia kept their mouths shut. A statement released by ASEAN foreign ministers did not mention the tribunal, though it did endorse rule of law. The fact is China is seen as the key to economic development in the region. And while the United States talks about maintaining “primacy” in the military realm, China is already dominant in much of the region.

Contrary to commonly accepted views, China sees no need to challenge the US militarily and wants to avoid such confrontation unless pushed. The United States is unlikely to push. China through its artificial islands in the South China Sea can project its air and naval power throughout the area and check American bases in the Philippines. While other countries may still occupy a reef here or a rock there, China is in overall control. Since 2013, when the Philippines launched its case, China had called for bilateral talks instead. The day the ruling was issued, Wang said, “Now the farce is over. It is time that things come back to normal.”

China is getting its way. The Philippines, under President Rodrigo Duterte, decided that war is not an option. The alternative, in the new leader’s words: “Peaceful talks.”

China and the Philippines, in effect, will agree to share economic resources. Joint development is theoretically on the table. Manila also hopes for vast inflows of Chinese investment. Perhaps, because of the tribunal’s ruling, China may make more concessions than it would have otherwise. But since in China’s universe such legal high ground has no value, the Philippines may not benefit all that much.

The ruling won’t deter China from plans to increase dominance of Southeast Asia and the larger region. In China’s imagined world, the realization of Xi Jinping’s China dream will place China once again at the center of the world, after a couple of centuries disrupted by Western imperialism.

In the Chinese imagination, this is not subjugation of neighbors but simply restoration of the normal order. As former Foreign Minister Yang Jiechi said in an unguarded moment, “China is a big country and other countries are small countries, and that’s just a fact.” To some in China, this is a return to the traditional concept of tianxia, with barbarians benefiting from Chinese civilization.

China’s leaders no longer refer to neighbors as barbarians, but do recall that Confucian culture is embedded in many Asian countries and that the Chinese system of writing was borrowed by many, including Japan, Korea and Vietnam.

Perhaps that is why Singapore, a predominantly Chinese society, draws disproportionate Chinese ire when it’s seen as betraying the Chinese cause, not just Beijing’s interests. The elder statesman Lee Kuan Yew did this in 2009 by appealing to Washington to remain in Asia. “The size of China makes it impossible for the rest of Asia, including Japan and India, to match it in weight and capacity in about 20 to 30 years,” he said. “So we need America to strike a balance.”

The elder statesman’s words were followed two years later by the Obama policy of rebalancing to Asia, which China sees as containment. Lee’s son, Prime Minister Lee Hsien Loong, in Washington, said that the rebalance had been “warmly welcomed by all Asean countries.” Global Times rapped him on the knuckles, accusing him of siding with the United States. There is a limit to China’s tolerance, Global Times said.

China sees its dominance as crucial because of its own development needs. China wants the resources in the waters as well as under the seabed. China is the largest consumer of seafood, coal and aluminum, and its needs continue to grow. China will continue its sticks-and-carrots policy, using trade and investment as weapons. The China-initiated Asian Infrastructure Investment Bank, with capital of $100 billion, has begun approving its first projects, greatly elevating Chinese bargaining power. The One Belt, One Road plan will also bring investments to countries around China.

China’s vital interests are engaged elsewhere as well, such as South Korea, Japan and India, and relations are strained.

The official Chinese media reprimanded South Korea for having agreed in July to deploy the US-developed THAAD, or Terminal High Altitude Area Defense anti-ballistic missile system. The decision was made after North Korea conducted yet a fourth nuclear test and various missile tests earlier this year. China, however, considers the THAAD system a threat to its own security, with radar that can penetrate deep into the country.

China reminds Japan of its invasion of China more than 70 years after World War II. In mid-August, the official People’s Daily newspaper published a commentary warning that “Japan’s denial of past military aggression undermines world peace.” China also puts pressure on Japan by sending hundreds of vessels into areas near the Senkaku/Diaoyu islands, controlled by Japan but claimed by China.

As for India, China has actively campaigned for years to keep it from becoming a permanent member of the UN Security Council. More recently, China opposed Indian membership in the Nuclear Suppliers Group.

Of course, the biggest villain in the Chinese mind is the United States. Fu Ying, a spokesperson for China’s National People’s Congress, wrote recently that the problems in the South China Sea stem from 2009, when the Obama administration launched its rebalancing strategy. There is one problem with that explanation. The rebalance wasn’t announced until two years later, in late 2011. Fu’s explanation, like much else, was part of the Chinese imagination, and in that imagination all that matters is the central role of China.

Frank Ching is a journalist and author of Ancestors: 900 Years in the Life of a Chinese Family. Follow him on Twitter. This is published with permission of YaleGlobal, the Yale University Center for the Study of Globalization.