After spy balloon incident, can China and the U.S. talk again?

By David Brunnstrom and Michael Martina

WASHINGTON (Reuters) - When U.S. Secretary of State Antony Blinken this month called off his trip to Beijing, he chose his words carefully. China's launch of a spy balloon on a high-altitude journey over the United States was unacceptable and irresponsible, he said, but he was postponing - not canceling - his visit.

A week later, China's balloon has been shot down, the trip remains unscheduled, and the Friday and Saturday downing of two unidentified aircraft over Alaska and Canada raised questions about whether an adversary had sent more spy vessels into North American airspace.

Still, say analysts, the two countries have strong reasons to manage their disagreements. The question now is when, not whether, they find their way back to the negotiating table.

"Secretary Blinken ... talked about postponing the trip, not canceling it or ending all foreseeable high-level communication with the Chinese government," U.S. National Security Adviser Jake Sullivan said last week. "That is not going to happen."

China wants to revive its economy, still reeling from the crushing zero-Covid policy. To that end, Chinese President Xi Jinping hopes to improve relations that hit a dangerous low in August with the visit to Taiwan by then-U.S. House Speaker Nancy Pelosi and to persuade U.S. lawmakers not to push new rules aimed at thwarting China's efforts to produce advanced semiconductors.

And while U.S. observers had low hopes for Blinken's China trip, diplomats say a high-level visit is needed to put a "floor" under the relationship and to make progress on issues ranging from Chinese fentanyl to Americans detained in the country.

OUTRAGE AND HYPOCRISY

Restarting talks won't be easy. The balloon flight caused outrage in Washington, with politicians criticizing the U.S. military and U.S. President Joe Biden for failing to shoot it down when it first entered U.S. airspace.

China's foreign ministry has reacted angrily to Washington's spying allegations, saying the balloon was a civilian research craft and accusing the United States of hypocrisy.

The Pentagon said last week that China declined a U.S. request for a phone call between Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe.

This doesn't mean re-engagement can't happen, however.

"While it's all too common for the Chinese to refuse to engage in the military-military channel when it is needed the most — in a crisis — that doesn't mean the Chinese have given up on their effort to buy time by calming relations with the U.S. and the West," said Daniel Russel, the top U.S. diplomat for East Asia under former President Barack Obama.

U.S. leaders have also said communication channels must stay open even while calling the episode a violation of U.S. sovereignty, briefing dozens of countries on what they say is a global Chinese surveillance program and adding six Chinese entities to a trade blacklist.

Biden has said the balloon needed to be shot down, but has played down both the security threat and the impact on U.S.-China relations.

On Thursday, he said the incident was not a major security breach while noting that "the total amount of intelligence gathering that's going on by every country around the world is overwhelming."

GIVE TALKS A CHANCE

Short of a high-level visit, there are opportunities for diplomacy. In a report from Berlin, Politico cited diplomats as saying that China's top diplomat Wang Yi, whom Blinken was to meet in Beijing, would attend this year's Munich Security Conference, which is slated for Feb. 17-19.

Blinken will also attend the event, though neither side has said the two might meet there.

Another chance will be a China trip by U.S. Treasury Secretary Janet Yellen. On Wednesday Yellen said she still hoped to go to China, giving no details on timing, and China's commerce ministry said on Thursday it welcomed her willingness to visit.

While helpful, such meetings can only set the stage for the in-depth, high-level dialogue needed to steady ties.

Blinken could meet with the Chinese in Munich or at the G20 foreign ministers meeting in India in March, but he needs to visit Beijing and meet face-to-face with Xi to ensure messages on thorny issues like Taiwan and Russia get through, Russel said.

New U.S. restrictions on Chinese companies and Republican House Committee Chairman Mike McCaul's announced desire to visit Chinese-claimed Taiwan in April "could prove the straws that break the back" of such efforts, he added.

Bonnie Glaser, an Asia expert at the German Marshall Fund of the United States, cautioned that domestic pressures in both countries may mean it is too early for either side to re-engage.

"The Chinese don't want to look weak and they probably don't want to admit that they lied (about the balloon). President Biden is also under pressure from Republicans in Congress who insist the balloon should have been shot down sooner," said Glaser.

(Reporting by David Brunnstrom and Michael Martina; Additional reporting by Simon Lewis in Washington and Echo Wang in New York; Editing by Don Durfee and Deepa Babington)