Backwards Induction and Chinese Anti-Satellite Missiles

What is the function and impact of the new anti-satellite missile which the Chinese have been testing?

Conventional wisdom in the reporting of the test this morning is that the great danger is of an arms race but this seems a somewhat remote possibility to me. After all, two countries (Russia and the US) already have anti-satellite missiles and once you have them there isn't really anywhere else to race in terms of satellite destroying weaponry. Equally, I don't think the big difference will be in the military balance of power; this makes a limited difference to China's ability to fight the US in a conventional war.

To my mind the bigger impact would seem to be a change in how the game theory plays out with regards to a US intervention if a crisis were to develop such as a Chinese attack on Taiwan. At the moment China has no conventional means to attack the US directly and is restricted to attacking the military forces it has in theatre which would be a relatively hard target (although still vulnerable). If it were to use its nuclear weapons it would face a massive US nuclear retaliation which is a cost the US knows China is unlikely to endure for anything but a war of survival. As such, there is no credible deterrent to the US getting involved in a war in the Taiwan straights and the only costs it has to face are the actual military losses.

This is problematic for China because its airforce is massively undertrained and underequipped compared to the USAF and this is not likely to change any time soon as US technological development in fighter aircraft proceeds at a breakneck pace. A RAND study (you can read this online at that page without buying the report) into how a conflict over Taiwan might play out suggested that even a minimal US involvement would make China's chances of success extremely low.

What the satellite killing missiles offer China is an ability to seriously hurt US civilian interests, as well as possibly weakening their military capacity, without turning the conflict nuclear. As the US knows that this is a threat which the Chinese could go through with without facing nuclear annihilation it is much more credible than their nuclear forces and might make the US think again about intervening. This is particularly important if the question of going to war with the colossal Chinese military machine over a tiny state like Taiwan is already a pretty uncertain decision for the States. This could well tip the balance and cause the US to stay out of China's way.

If China has thought this through the same way I have the development of these missiles is a dangerous sign of Chinese intent to attack Taiwan militarily if it feels things are not going its way.