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Chinese balloon, State of the Union, debt ceiling: This week in politics

As the takedown of a suspected Chinese spy balloon weighs on U.S.-listed Chinese stocks and President Biden prepares to deliver his State of the Union address, here's what you need to know from Washington, D.C., this week:

Chinese spy balloon fallout

President Biden's decision to shoot down a Chinese surveillance balloon over the weekend has brought U.S.-China tensions to the forefront of Washington politics.

Chinese officials claimed the balloon was used for "mainly meteorological" purposes; however, reports of another balloon over Latin America have raised questions about China's capabilities for surveillance and espionage.

CHARLOTTE, USA - FEBRUARY 4: Chinese spy balloon flies above in Charlotte NC, United States on February 04, 2023. The Pentagon announced earlier that it is tracking a suspected Chinese high-altitude surveillance balloon above the continental US. A Chinese Foreign Ministry statement said the balloon was a âcivilian airship used for research, mainly meteorological purposes.
A suspected Chinese high-altitude surveillance balloon flies above in Charlotte, NC, United States on February 04, 2023. (Photo by Peter Zay/Anadolu Agency via Getty Images) (Anadolu Agency via Getty Images)

House Speaker Kevin McCarthy (R-CA) and Republicans criticized Biden for not shooting down the balloon earlier and are reportedly considering passing a resolution that would condemn Biden's handling of the situation.

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Democrats have pushed back and suggested that Republicans are placing too much emphasis on playing politics instead of uniting to counter China on the situation. Republicans and Democrats have sought to make strategic competition with China a nonpartisan issue, notably through McCarthy's decision to create a China commission.

The escalating tensions resulting from the balloon situation also prompted Secretary of State Antony Blinken to cancel his planned trip to China. Meanwhile, China has criticized Biden's decision to shoot down the balloon, and it remains unclear how America's strategic partners will interpret the incident.

U.S. President Joe Biden speaks as he attends the DNC 2023 Winter Meeting in Philadelphia, Pennsylvania, U.S., February 3, 2023. REUTERS/Elizabeth Frantz
U.S. President Joe Biden speaks as he attends the DNC 2023 Winter Meeting in Philadelphia, Pennsylvania, U.S., February 3, 2023. REUTERS/Elizabeth Frantz (Elizabeth Frantz / reuters)

State of the Union

Biden is expected to address the China challenge, among other issues, in his State of the Union address on Tuesday night.

Investors will be watching for clues about whether Biden will implement additional sanctions and trade controls in response to China's actions. Biden is also expected to urge Congress to continue its support for Ukraine as some Republicans have begun to question the U.S.'s long-term financial commitment to the country.

Domestically, Biden will likely outline a vision for the nation's economy at a time in which strong jobs data have stoked investors' fears that the Federal Reserve will continue to raise rates to combat inflation.

It's also worth noting that Biden's State of the Union Address will be interpreted as an opening bid to a potential reelection campaign. Although television viewership has declined in recent years, the State of the Union still provides one of the largest collective audiences for a White House occupant.

U.S. House Speaker Kevin McCarthy (R-CA) exits the West Wing as he walks to face reporters after he met with U.S. President Joe Biden to discuss the federal debt limit and spending, at the White House in Washington, U.S., February 1, 2023. REUTERS/Kevin Lamarque
U.S. House Speaker Kevin McCarthy (R-CA) exits the West Wing after he met with U.S. President Joe Biden to discuss the federal debt limit and spending, at the White House in Washington, U.S., February 1, 2023. REUTERS/Kevin Lamarque (Kevin Lamarque / reuters)

Debt ceiling

The debt ceiling stand-off continues to play out.

Speaker McCarthy's meeting with Biden last week at the White House seemed to indicate that both sides are willing to raise the debt ceiling before the U.S. defaults on its debt, which is expected to take place by the end of the summer or early autumn.

Although no agreement has been reached yet, McCarthy told conservative media outlets after the meeting with Biden that he remains optimistic that he'll be able to get Democrats to concede on making spending cuts to government programs.

But that will be a tough sell for Democrats — particularly progressives, who will be pressuring Biden as a new election cycle inches closer.

Kevin Cirilli is a visiting media fellow at the Atlantic Council's Global China Hub and the Krach Institute for Tech Diplomacy at Purdue. Follow him on LinkedIn here.

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