Well, there are a few diplomatic "anomalies" that I didn't notice in vanilla....a couple of times recently I've had the AI "ask forgiveness" for invading one of my CS buddies AFTER the CS was taken away by some other civ...though this seemed to happen just shortly after I lost the CS....
It's not triggered by allies or friends, it's triggered by 'pledge to protect'. If you've pledged to protect a CS, and haven't revoked or lost that protection, the other civs consider it 'yours'.
@ Phil, I won't quote train you on it since your post is quite big. I want the AI to take Human considerations to how it fights. I want it to consider fighting it's neighbor first. I want it to be annoyed if you stole a wonder intricate to it's strategy, I mentioned possibly wanting to take the city but annoyed is annoyed, doesn't matter if it's the Oracle or the Statue of Zeus, I wouldn't like the guy if wonders were my thing.
The problem with this, as I noted, is that the AI is not a human, and its diplomacy works on a sliding scale. Enough negative modifiers = war. Slightly fewer = bad or unwilling trades. The only way you can reflect 'annoyance' within that framework is to add a negative modifier - and if you add enough modifiers based on considerations that make no difference to the AI's strategy, or that it can't do anything about, you just end up with an AI with a whole bunch of modifiers telling it to do things that make the game easier for the human. If the other player was a human, however annoyed they were by someone grabbing the same Wonder they wouldn't refuse a deal that could keep them in the game in most cases. The AIs 'feel' more human when doing things that help themselves, regardless of whether or not they do so based on considerations a human would have.
I want the AI to do things that advance its strategy and present, if not a challenge, at least a source of interest and engagement. In the OP's case, China may not improve its chances of winning the game much by allowing open borders, but it presents the player with the story of the time he came in and marched to China's rescue.
Personally I tend to find that there is a relation between people finding the diplomacy to be really weak and people that play on lower difficulties, mostly because it's easy to rack up really high negative modifiers when you can snowball and have a winning position before the Renaissance. However I would want the AI to hate the guy who is winning... It's just a little touchy because the guy who is just getting into the game and playing on say... Prince? might not like that the AI will hate him because of all the shiny wonders.
Yes, there's likely to be something in that. I usually take the leading position in practice in the mid-game in my Immortal games, but am rarely the score leader and that may be one reason I can play peaceful games consistently - although I do need to actively decide not to expand to places AIs might not like and so forth if I want to remain friendly with those particular AIs. Right at the start I tend to avoid being rushed partly by being neither an obvious threat or an obvious pushover. Yet that can't be all there is to it - in many recent late games there have only been two of us in the running for victory, and the other AI will still cheerfully renew DoFs while tussling over city-states with me or trying to complete their spaceship first.
Once you can get those early friendships in, you can almost act with impunity. Early diplomacy needs attention. If you denounce the person back who denounces you first, you might get chain denounced by 4 others. This is in part tied in with exploration.
I don't see this as a problem with the system, simply with not applying it as intended. Denunciation isn't a retaliatory measure, and you don't gain anything by denouncing someone you don't need to. It's a way of building friendships with civs that dislike the one you're denouncing, or if you already have friends being the one whose own denouncement prompts the chain denunciations against your enemies. Denouncing someone just because they've denounced you will quite reasonably make that civ's friends upset. I can't recall the last time I had chain denunciations in a game, but I quite often initiate them or join allies who have already denounced the civ I dislike.