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China urges restraint as U.S. military searches for balloon remnants

A jet flies by a suspected Chinese spy balloon as it floats off the coast in Surfside Beach

By Yew Lun Tian and David Lawder

BEIJING/WASHINGTON (Reuters) -Beijing on Monday urged Washington to show restraint as the U.S. military searched for remnants of what it believes was a Chinese surveillance balloon it shot down over the Atlantic but which China says was a civilian craft that accidentally drifted astray.

The balloon drama has further strained tense relations, prompting Washington to cancel a planned visit over the weekend to Beijing by Secretary of State Antony Blinken.

A U.S. fighter jet shot down the balloon off South Carolina on Saturday after the military had tracked its path across the continental United States, a response China described as an "obvious overreaction".

China has repeatedly said the balloon was intended for scientific purposes and had blown off course.

"China firmly opposes and strongly protests against this," Vice Foreign Minister Xie Feng said in remarks to the U.S. embassy in Beijing posted on the ministry's website.

The U.S. Navy was working to recover the balloon and its payload and the Coast Guard was providing security for the operation, General Glen VanHerck, commander of the North American Aerospace Defense Command and U.S. Northern Command, said on Sunday.

A successful recovery could potentially give the United States insight into China's spying capabilities, though U.S. officials have downplayed the balloon's impact on national security.

On Monday, Chinese foreign ministry spokesperson Mao Ning said China had found out its balloon had drifted over the United States after being notified by it.

"The unintended entry of this airship (into the U.S.) is entirely an isolated, accidental incident. It tests the sincerity the U.S. has in improving and stabilising bilateral relations and the way it handles crisis," she said.

"We hope the U.S. will work with China to properly handle our differences, avoid miscalculation and misunderstanding and harming our mutual trust," she said.

Mao said another balloon, spotted over Latin America, was an unmanned civilian airship on a test flight that "severely deviated and unintendedly entered the space above Latin America because it was affected by the weather and because it has limited self-steering capability".

On Sunday, Colombia's military said it sighted an airborne object similar to a balloon after the Pentagon said on Friday that another Chinese balloon was flying over Latin America.

SENSITIVE TIME

The balloon incident comes as the United States and China have sought to bolster communications and begin to mend ties that had been under severe strain in recent years over tensions on several fronts, including U.S. efforts to block Chinese access to key cutting-edge technologies.

China has warned of "serious repercussions" and said it will use the necessary means to deal with "similar situations", without elaborating, although some analysts said they expect any response to be finely calibrated to prevent making bilateral ties even worse.

Brokerage ING said in a Monday note that the incident could exacerbate the "tech war" and would have a negative near-term impact on China's yuan currency.

"Both sides will likely impose more export bans on technology in different industries. This is a new threat to supply chain disruption, although the risk of logistical disruption from COVID restrictions has now disappeared," it said.

"This new risk is more of a long-term risk than an imminent one," ING said.

The yuan rebounded on Monday after falling to a low of 6.8077 against the dollar in early trade, its weakest level in nearly a month.

(Reporting by David Lawder, Kanishka Singh, Gram Slattery and Andy Sullivan in Washington and Yew Lun Tian, Bernard Orr and Tony Munroe in Beijing; Editing by Michael Perry, Clarence Fernandez and Nick Macfie)