I doubt it will escalate just in and of itself. China is staking a claim, and there's a kinda-sorta legal basis for that - see the building up of the little land specks. As Flash said, it's a dubious argument but a lot of these international law things are. You shore up (see what I did there?) that claim by making an effective control argument - i.e., it's commonly recognized you exercise sovereignty over that area. By, for example, everyone asks your permission to sail or fly through an area. So you tell everyone they have to ask your permission. They refuse to ask your permission just to show your claim isn't recognized, you protest to show that you're still standing on the principle, everyone keeps on keeping' on. Nobody has any interest in picking a fight over this.
China probably hopes that eventually everyone will find better things to do with their boats and planes for long enough for a claim to not be laughably absurd. They do tend to play the long game.
Could it escalate? Maybe. If planes or boats bump and for whatever reason, no one's in a mood to de-escalate. You can't discount domestic opinion. There's still a lot of historical bad blood between China and Japan, and Vietnam and China. So if, say, a PLAN ship bumped and sank or killed civilian Japanese sailors, even accidentally, the Japanese would demand an apology and reparations and the Chinese politically can't be seen apologizing to the Japanese.
