China's activities generally appear to support its policy of economic pragmatism towards territorial disputes. But the Philippines has been upset by activities on Mischief Reef, stirring fears of Chinese claims to the whole South China Sea. Internal transformation may stimulate Chinese nationalist ambitions to bolster the legitimacy of its claims, especially over Taiwan. In the future, China is unlikely to drop all its claims to sovereignty; its nationalism is not aggressive; and there could be internal factional rivalry over the South China Sea policy. Beijing is aware of the risks of seeking hegemony there, and pragmatism remains an influential force in its foreign policy.