By Humeyra Pamuk and Michael Martina

(Reuters) -When U.S. Secretary of State Antony Blinken meets his Chinese counterpart in Beijing next week there will be plenty to disagree about, from Taiwan to chips and trade. But they will both be trying to answer the same question: How can the world's two biggest economies avoid a new Cold War?

Ties between the superpowers have frayed over the past few years and sank to their worst in decades last August, when then U.S. House of Representatives Speaker Nancy Pelosi visited Taiwan, prompting unprecedented Chinese military drills near the self-ruled island.

Since then, President Joe Biden's administration has said it hopes to build a "floor for the relationship" and ensure that rivalry does not spiral into conflict. Biden met with Chinese President Xi Jinping in November with that goal in mind and both leaders pledged more frequent communications.

Complicating matters, the Pentagon said on Thursday that a suspected Chinese spy balloon has been flying over the United States for a few days, adding that Washington has been tracking it since it entered the U.S. airspace.

It was not immediately clear how the incident would impact Blinken's trip, during which he has been expected to meet Chinese Foreign Minister Qin Gang and possibly Xi.

Another key point of tension is the intensified U.S. regulatory onslaught focused on China, including export controls that could hobble its chip manufacturing industry.

With a new U.S.-Philippines agreement to grant the United States greater access to military bases and a likely Taiwan visit by new House Speaker Kevin McCarthy, analysts see Blinken's main task during the Feb. 5-6 meetings as ensuring both countries can avoid a crisis.

"I think the goal is to basically fast-forward this Cold War to its detente phase, thereby skipping a Cuban Missile Crisis," said Jude Blanchette, a China expert at Washington's Center for Strategic and International Studies (CSIS).

"This is really about reestablishing the undergirding of the relationship and putting in place some procedures and mechanisms to be able to manage through some of the tensions in the relationship," he told a CSIS briefing on the visit.

LOOKING FOR STABILITY

China is also keen for a stable U.S. relationship so it can focus on its economy, battered by the now abandoned zero-COVID policy and neglected by foreign investors alarmed by what they see as a return of state intervention in the market.

In recent months Xi has met with world leaders, seeking to reestablish ties and settle disagreements, including with Australia, which will resume coal exports to China after a three-year hiatus. He has also sidelined some of his "wolf warrior" diplomats whose strident rhetoric alienated many of China's trade partners.

Chinese state media struck a conciliatory tone ahead of Blinken's visit, with a commentary in The People's Daily, the official newspaper of the ruling Communist Party, arguing it is impossible for the two economies to decouple and the countries "should deepen cooperation to promote the development of bilateral relations."

Despite such pragmatic rhetoric, China's actions - especially its military activity around Taiwan and in the South China Sea - have not moderated, analysts said.

"China watchers have witnessed this same diplomatic song and dance before," said Craig Singleton, Senior Fellow at the Foundation for Defense of Democracies in Washington.

"Xi understands he can parlay professed peace offerings to chart a much smoother course out of China's current COVID crisis, which remains his overwhelming priority."

Blinken's visit to China will be the first by a secretary of state since October 2018 when Mike Pompeo, in the administration of Donald Trump, met then-foreign minister Wang Yi in Beijing, with the two dignitaries exchanging pointed remarks amid a worsening trade war.

Joining him will be Deputy Secretary of State Wendy Sherman.

DIM PROSPECTS

Expectations for the trip are low. While Blinken will raise U.S. concerns such as Beijing's "no-limits" partnership with Russia that the countries declared weeks before Moscow's Feb. 24, 2022, invasion of Ukraine, no breakthrough is likely on this or major issues such as Taiwan, trade or human rights.

Indeed, the administration has less room to maneuver given an increasingly hawkish U.S. Congress, where the Republican-controlled House last month created a select committee on China, which will focusing on countering Beijing's growing international influence.

Washington hopes for incremental progress on more specific but vital matters such as securing China's cooperation on fentanyl, global health, climate change and the cases of U.S. citizens detained there.

Even there, progress may be halting, particularly as Beijing seeks concessions in unrelated areas - for example, moderating U.S. semiconductor export controls in exchange for greater cooperation on the illicit flow of fentanyl from China, according to one source.

"Much like it has on other issues, [Beijing] is attempting to link cooperation with other completely unrelated issues. That ... is more than deeply frustrating," said another source familiar with the administration's thinking, adding that China has rebuffed Washington's "very specific" proposals.

Blinken may raise by name the cases of American citizens the United States says are wrongfully detained in China, specifically Kai Li, David Lin and Mark Swidan, sources said, but he is unlikely to secure their release immediately.

(Reporting by Humeyra Pamuk, Additional reporting by Michael Martina and David Brunnstrom; Editing by Don Durfee, Grant McCool and Edwina Gibbs)

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