China's defeat to the Philippines at the U.N. Permanent Court of Arbitration has left Chinese President Xi Jinping with only two options -- both of which will threaten his standing as leader of the Chinese Communist Party (CPC) at the party's next national congress in the autumn of 2017.

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Xi can either tone down the ultra-nationalist rhetoric that has marked Beijing's knee-jerk response to the arbitral tribunal ruling nullifying his cherished "nine-dash line" ploy and open a dialogue with the Philippines.

Or he can double down on his fiery rhetoric and trigger a naval clash, declare an air defense identification zone in the South China Sea and build a Chinese man-made island on Scarborough Shoal, just 240 kilometers from Clark Field, the major American military staging base in the Philippines.

Russian media has reported the U.S. has told China these actions are its line in the sand China had better not cross or face the consequences.

U.S. media are urging President Barack Obama (perceived as a dogged pacifist determined to end his term without engaging in a war) to vigorously contest these actions or lose America's leadership in Asia.

And should Xi be unreasoning enough to cross America's line in the sand, this will bring his outgunned People's Liberation Army Navy (PLAN) face-to-face with the two U.S. Navy nuclear carrier battle groups currently patrolling the South China Sea to keep China at bay.

Most learned naval experts affirm the U.S. Navy with its carriers, superior military technology and battle experienced crews will prevail against the PLAN that has never fought a major naval battle in its history.

And, not to forget, China's much hyped DF-21D anti-ship ballistic missile (the so-called carrier killer) isn't fully operational and has never been tested against any target floating on the ocean.

Either of these two options will undoubtedly be used by Xi's enemies to strip him of power or to depose him as leader of the CPC next year. For Xi, the legal defeat of his grand South China Sea bluff is a lose-lose situation, the worst outcome of a Zero Sum game gone wrong.

The Philippines and the United States, however, have both left Xi with an escape route so the Chinese leader doesn't lose face, especially since China will host a summit of the Group of 20 nations in September.

The Philippines hinted at the possibility of negotiations with Xi regime and said the Philippines and China need not take "provocative action" in the meantime. The U.S. also responded with restraint.

TagsXi Jinping, Permanent Court of Arbitration, Philippines, South China Sea