THE ISSUE OF CHINESE SPYING dominated Washington this weekend, with enough hot air to inflate a balloon. There was the usual political bickering but the most intriguing angle was whether this incident reflects instability in Beijing.
CHINA WAS EXPECTED TO LAUNCH a charm offensive in 2023, in an effort to soften its image as a secretive bully. Now it will take many months to get Beijing-Washington relations back on track.
THE BUZZ IN DIPLOMATIC CIRCLES was that Xi Jinping and his top aides may have been blindsided by the balloon; there are so many Chinese espionage operations that this one may not have attracted much attention initially.
THE FINANCIAL TIMES REPORTED THIS WEEKEND THAT “The Chinese were caught off guard and didn’t have a story yet. We made clear that we knew exactly what was going on and needed rapid actions … It took them much longer than necessary to get back to us” as China changed its story frequently.
THIS RAISES A TROUBLING ISSUE: Are factions within the Communist Party power structure trying to undermine the president? The very well plugged-in David Ignatius of the Washington Post reports that “Intelligence analysts are considering the possibility that the Chinese military or hard-line elements within the leadership deliberately sought to sabotage the Blinken visit.”
IF THAT’S THE CASE, THE BALLOON HAS BEEN A DISASTER FOR CHINA: Beijing will be on the defensive as talks resume about an eventual Blinken visit, and there’s a virtually unanimous opinion in Washington that sanctions won’t be lifted — they may even be strengthened.
THE INCREDIBLE JOBS REPORT last Friday has two major implications: First, it points to at least another couple of 25 basis point rate hikes, and it demolishes the argument that the Fed might be easing by fall.
SECOND, IT GIVES JOE BIDEN an opportunity to boast tomorrow night in his State of the Union address. Many Democrats are still lukewarm about Biden running again, but we defer to James Carville, who famously said “it’s the economy, stupid.” The economy is quite strong, and Biden will take credit.
Related: Republicans Flirt With a Very Risky Issue: Cutting Social Security
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