People can say that China's been escalating the situation all they want, but the facts are that realpolitik necessitates doing something. China needs to show ASEAN two things simultaneously:
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Aligning with China is beneficial
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Aligning with the US is harmful
(1) Is easy: China FDI outflows to ASEAN countries have been absurd, China is dumping money to connect Vietnam to China's HSR network (at cost), improving Cambodia's role in international trade through canal construction, obscene EV deals in Indonesia/Malaysia, and more.
(2) is much more difficult. Many ASEAN countries have been trying to thread the needle between taking Chinese money and accessing US markets. The Philippines is, obviously, the most egregious player here. China is trying to show ASEAN that aligning with the US has consequences (in contrast, Duterte's Philippines had a very healthy relationship with China), especially as China looks to build a regional trade superbloc akin to NAFTA.
You're completely forgetting the most important part...
China has already shown that they're willing to negotiate (e.g. the Gulf of Tonkin with Vietnam, which was favourable to the Vietnamese).
With regards to the Paracels, Vietnam holds claims solely as leverage in the Spratlys. Vietnam lacks any control over the Paracels and has not supported American FONOPS through the Paracels for that reason alone. Vietnam knows that their claim to the Spratlys is strong. Vietnam has been escalating their island-building in the Spratlys for that exact reason. From what I can tell, Vietnam is trying to secure partial or total jurisdiction over the Spratlys in exchange for yielding the Paracels. Unfortunately, until Vietnam/China obtain exclusive co-sovereignty in the region, such an agreement is impossible.
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