(Bloomberg) -- Beijing's abrupt shift from expressing regret to threatening retaliation over the US's spy-balloon claims reflects the domestic imperative for Xi Jinping to show he's standing up for China against external pressure, further narrowing the window to reset ties before the US election season gets into full swing.
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This weekend was supposed to be a step forward, with Secretary of State Antony Blinken arriving in Beijing for the first such visit in more than four years. But the dispute meant it was spent trading barbs real and figurative, as an F-22 Raptor blasted the high-tech Chinese balloon out of the sky off the coast of South Carolina with a single Aim-9X Sidewinder missile.
Instead of establishing "guardrails" and holding high-level meetings - including possibly with President Xi - Blinken ended up postponing his trip until a date yet to be determined.
China, which says the device was a civilian climate research vehicle that unexpectedly drifted over American territory, denounced the US's "clear overreaction" in deciding to use force. "China will resolutely safeguard the legitimate rights and interests of the company concerned, and reserves the right to make further responses if necessary," the foreign ministry said in a statement Sunday.
"This incident tells us we haven't found the floor of the relationship," said Drew Thompson, a visiting senior research fellow at the Lee Kuan Yew School of Public Policy in Singapore. "The relationship is not heading in a positive direction and could deteriorate further."
The balloon saga comes less than three months after President Joe Biden and Xi agreed to resume talks in their first face-to-face meeting as leaders in Bali, a detente that has largely held despite the US's efforts to support Taiwan's military and curb Chinese access to cutting-edge semiconductors. While few expected major breakthroughs from Blinken's scrapped visit, it was seen as an effort to preserve the status quo.
That's vital to the economies of both countries, since business links have held up despite the acrimony. Trade between the US and China was on course to break records in 2022.
The question now is whether both sides can find a way to climb down without further escalation. It took weeks to get conversations back on track last summer after then-US House Speaker Nancy Pelosi - a Democrat and key Biden ally - visited Taiwan. China responded by firing missiles over the democratically governed island that Beijing claims as its own.
Ties could be tested again if Kevin McCarthy, the newly installed Republican speaker, decides to follow through on an earlier pledge to make his own trip to Taipei. Presidential elections in the US and Taiwan could ramp up tensions further, with Biden facing bipartisan calls to show strength toward Beijing.
Xi faces his own internal pressures as he attempts to demonstrate strong leadership after dramatically abandoning his signature Covid Zero virus strategy that prompted mass protests in November. Videos of the balloon being shot down were allowed to circulate widely on China's highly censored internet.
"It's just a civilian balloon, the US is using a cannon on a mosquito," wrote one user. Another said: "It is so ironic that a stray balloon has scared the US so much. Should China reciprocate by downing all unapproved US aircraft or ships that enter China's airspace and territorial waters from now on?"
The Biden administration didn't give China advance notice of the plan to shoot down the balloon, US officials said. Officials expect US-China relations to be difficult moving forward, but said both countries have reasons to put the incident behind them.
"The ball is in China's court," said Diana Choyleva, chief economist at Enodo Economics, a London-based research firm focused on China. "But can Xi afford to make a visibly conciliatory gesture in order to appease the US and allow enough space for the Biden administration to resume efforts to put a floor under the fast-deteriorating relationship? Let's see."
Just a day earlier, China had shown rare contrition over the balloon, saying it "regrets the unintended entry of the airship into US airspace due to force majeure." In a call with Blinken, top Chinese diplomat Wang Yi cautioned against "groundless conjecture or hype," urging both sides to handle their differences in a "calm and professional manner."
Wang Yiwei, director of Renmin University's Institute of International Affairs and a former Chinese diplomat, said Beijing's response reflects the "fragile" nature of US-China relations.
"The US is finding an excuse to delay the Blinken trip, and the Chinese side is also saying they didn't invite him," he said. "This is because they still haven't reached an agreement on many things, and the US is not changing its policy on China, so both sides have now found an excuse to postpone the trip."
Ja Ian Chong, an associate professor of political science at the National University of Singapore, said Beijing was trying to triangulate: It wants to continue engagement with the US, look strong to its domestic audience and maintain consistency after saying the balloon was civilian in nature.
"Political dynamics within the PRC makes being conciliatory with the US difficult - they too have to juggle domestic concerns," he said, referring to China's formal name. "Under the current situation even if there is some desire to improve contact with the US, that's by no means a foregone conclusion."
--With assistance from Sheryl Tian Tong Lee, Olivia Poh, Yujing Liu, Manuel Baigorri and Rebecca Choong Wilkins.
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