Spy balloon furore turns focus to Xi’s leadership

President Xi Jinping’s push to revive China’s economy at the outset of his historic third term in power relies on two abrupt shifts in policy: a hasty retreat from his zero-Covid strategy and a move to stabilise tense relations with the US.

While the former effort is well under way and will provide at least a short, sharp boost to the world’s second-largest economy, the latter has been stalled by the “spy balloon” crisis, which has threatened to freeze diplomatic contact between the world’s superpowers and deepen divisions over advanced technology and Taiwan.

The fray prompted Antony Blinken, US secretary of state, to call off a planned visit to Beijing at the last minute, which was intended to follow up on Xi and President Joe Biden’s constructive face-to-face meeting on the sidelines of November’s G20 summit in Indonesia.

The balloon, which Chinese officials insist was a meteorological “unmanned airship” that inadvertently strayed into Canadian and US airspace before it was shot down on Saturday, prompted outrage and mockery as it drifted slowly across North America.

If the aircraft was a surveillance operation, it would raise serious concerns about decision-making at the top of China’s policy apparatus just as Xi prepares to begin his precedent-breaking third term as president. Backed by a new slate of loyalists, Xi’s elevation at the annual session of China’s rubber-stamp parliament next month will cement his status as the country’s most powerful leader since Mao Zedong.

The Biden administration said Chinese surveillance balloons had transited the US on only a handful of occasions over the past six years, suggesting that last week’s alleged spy mission was either approved by Xi despite the risks or was a relatively rare operation that he was unaware of, an unsettling prospect for both Washington and Beijing.

“An open question is whether Xi Jinping knew about the mission and approved it, and what the assumptions were about its potential impact on [US] relations,” said Drew Thompson at the Lee Kuan Yew School of Public Policy in Singapore.

“We don’t know whether this demonstrates that the People’s Liberation Army is not co-ordinating politically sensitive missions with the party leadership, or whether the PLA is throwing a wrench into Xi Jinping’s effort to lower the temperature of the US-China relationship.”

Any rapprochement with the US would reinforce Xi’s efforts to right China’s stalling economy, which expanded just 3 per cent in 2022, the second-weakest reading since 1976, underscoring the costs of the zero-Covid policy that crushed consumption with rolling lockdowns.

Policymakers in Beijing are also grappling with declining exports and a property crisis that has plunged developers into default and knocked home prices.

At the same time, the US has ramped up efforts to hobble China’s semiconductor industry in a tech war between the world’s leading powers. Washington has imposed sweeping export controls to restrict China’s access to advanced chips and has rallied allies to choke off the flow of components and manufacturing tools that would allow Beijing to strengthen its domestic chipmaking industry.

Easing economic hostilities would relieve pressure on Beijing to jump-start growth as it reopens from the pandemic, while warming ties with Washington could help de-escalate tensions on issues such as a possible conflict over Taiwan, over which China claims sovereignty and which it has threatened to claim by force.

Paul Haenle, an Asia expert at the Carnegie Endowment for International Peace, said: “It’s pretty clear [Xi] wants to put the relationship on better footing at least in the near-term so they can deal with their challenges at home.”

But he added that the furore over the balloon, especially if followed by a mooted visit to Taiwan by Republican House Speaker Kevin McCarthy, “underscores the incredibly fragile nature of US-China relations and the potential for significant further deterioration”.

At the very least, the balloon incident will delay any bilateral reconciliation for weeks or months — and even then, Biden’s room for manoeuvre will be constrained by hawkish Republicans.

Steve Daines, Republican senator for Montana, called the balloon a “tremendous embarrassment for the US”.

“It’s one more example of the weakness of the Biden administration on the global stage,” Daines, who once worked in China’s southern Guangdong province for Procter & Gamble, said as the balloon drifted over nuclear missile silos in his home state.

Beijing has met Republican outrage in kind, accusing the US of “overreacting” and claiming the balloon’s straying into US airspace was a “totally unexpected” accident.

On Monday, China’s vice-foreign minister Xie Feng, whom Xi has nominated as his next ambassador to Washington, lodged a formal protest with the US embassy in Beijing.

Chinese analysts downplayed the long-term ramifications of the confrontation, which they said was likely to blow over, adding that Blinken’s visit was unlikely to achieve concrete results even if it had gone ahead.

“The balloon thing is a temporary incident and can be resolved,” said He Weiwen, a senior fellow at the Center for China and Globalization in Beijing and a former Chinese diplomat. “It will not have a long-term impact on Sino-US relations.”

“I think [Blinken] will come to China pretty soon,” said Wu Xinbo, a US expert at Fudan University in Shanghai. “Washington and Beijing had made serious preparations during the past few months for the trip to re-establish dialogue mechanisms between the two countries.”

Additional reporting by Xinning Liu in Beijing

This post was originally published on Financial Times

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