I agree with most of this, though I think China fully realizes its actions are not likely to increase support for the KMT (see last year's TW elections). I think their motive is to scare TW / US enough to not issue a formal declaration of independence, something that would force China to respond militarily or lose face (and domestic support)

China is playing for time to try and build comprehensive power and self-sufficiency. As it is right now, they are highly vulnerable to being cut off from critical food, oil, and other supplies by the US Navy during a TW crisis or war, which could very well lead to a collapse of the PRC.