Japan, Vietnam, Philippines and other countries are very concerned by this action. The United State which has defence treaties with these countries and with Australia has announced its opposition to this development.
About 60% of trade pass through this area and any disruption will have dire economic consequences. The Spratlys lie about 600 miles from China, far from the recognised international boundary. The Americans have much naval activities in this area and already have signalled that they will not sit idly by while this construction is going on.
The possibility of actual conflict is high. Japan is rebuilding its navy and is stepping other military activities. Vietnam, which ahs fought many wars with China, the last in the late 70s is also ramping up its military build-up and the Americans have been sending spy planes over the area.
The Chinese may have miscalculated. They may have thought that the Americans are too busy elsewhere and that President Obama is too distracted to make a "fuss".
They are wrong. Obama's pivot east is designed to contain, if not confront the Chinese, not only economically but politically and militarily. These are indeed interesting times.