The chinese nodes would be on a permanent fork. Each node owner could still delete his copy of the blockchain individually and the node would eventually download the "right" chain. There is not a single "somebody" that triggers the re-org though.
Pretty sure that's the definition of consensus failure. I guess they think this is ok, and people will naturally(somehow?) decide which fork is "right".
OTOH I call that "broken".
What would happen in Bitcoin in the same situation when you have Chinese miners cut off from the rest of the world and mining their own fork with their PH/s for 3 days?
I guess the difference here is not in Bitcoin's favor. If Bitcoin miners are cut off for 3 days, they can't magically transfer their hardware to some other country and keep on mining there. While in NXT they can rent a VPS for $5/month in some other country (provided it's not a full cutoff of internet access which would be a major disruption of all economic activity) and keep on forging with the rest of the world on that VPS, as well as use it to send transactions. Bitcoin miners would be at a loss in that case. That makes PoS superior as it doesn't have a physical location limitation.