'Doing nothing' (or very little) by no means reduces the possibility of conflict escalation, possibly the opposite.
By declaring such intrusions as an 'act of war' (or maybe something literally just a little less hard sounding) it's a signal to foreign powers of the seriousness of such activities.
There is no doubt that this is a really, really serious act that has to have serious consequences.
In this new 'information era' we have to establish new boundaries. Those boundaries will help establish clarity, validate responses, enable 3rd parties to take a judicial view instead of just a political one etc..
Edit: For the last 30 years, China has been on a fairly exponential path to increasing aggression, there's no reason at all to believe this will not continue to the extent they have the material ability (i.e. supporting economy) unless they are stopped, or it becomes too painful for them to continue. If there is little meaningful response to this action, it will grow 10x. Charging the military staff responsible is the wrong tactic as the state is responsible, not these actors (it may even be against the Geneva convention), but more importantly, the cost to the state is nothing. Throw a few officers under the bus for a massive attack? That is 'no consequence' to them, and maybe even not said charged officers. There won't be any lack of volunteers. There has to be a pretty comprehensive coordinated response, and definitely not just some artefact/negotiating point in a trade war. The response may include trade, but it shouldn't be part of a tit-for-tat in a trade deal.