Welcome back to Global Insider’s Friday feature: The Conversation. Each week a POLITICO journalist will share an interview with a global thinker, politician, power player or personality. This week, national security reporter Erin Banco talks to Sen. Mark Warner (D-Va.) about U.S.-China relations in the era of the spy balloon and amid the prospect of Beijing arming Russia.

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After the Chinese surveillance balloon first emerged over the U.S. late last month, diplomatic relations between Washington and Beijing quickly deteriorated.

Beijing has continued to deny that its balloon spied on sensitive military sites in the U.S. and it has deflected allegations that it is considering sending lethal aid to Russia to aid its war effort in Ukraine. Now, the two countries are engaged in a tit-for-tat that has the potential to develop into an all-out diplomatic crisis with wide-ranging foreign policy consequences.

Despite sharp words from top Biden officials such as Secretary of State Antony Blinken and national security adviser Jake Sullivan about China’s behavior, questions have emerged inside the administration and on Capitol Hill about how the U.S. will approach its relationship with Beijing in the coming weeks and days.

GOP lawmakers on Capitol Hill have pushed for a tougher U.S. posture toward Beijing. But most Democrats support a far more even-handed posture – one that allows the U.S. to ratchet up its competition with China in the technology sector while leaving the door open for cooperation on other geopolitical issues like climate.

What’s emerged is a U.S. policy on China that is often difficult to understand. The administration is seemingly trying to do three things at once – hold China accountable, compete the country economically and work with Beijing to solve some of the world’s most pressing global crises.

Sen. Mark Warner (D-Va.), the chair of the intelligence committee, has for years called for Washington to do more to limit Beijing's access to sensitive American technology and to help create a business environment that allows for the U.S. to compete with China. I sat down with him to talk about the extent to which recent events could come to define the next chapter in U.S.-China relations.

The following interview has been edited for length and clarity.

I want to talk about the balloon for a second. Were you surprised at all by that development? 

Nation states spy on each other. I am not surprised that China is trying to observe what's happening in America, number one. Number two, I, along with Sen. [Marco] Rubio on our committee, we've moved very aggressively to make sure that the United States military, Air Force and the Navy, treat seriously spotting of what's called unidentified aerial phenomena — UAPs — and what we used to call UFOs. It didn't get a lot of attention, but there have been lots of sightings of UAPs off the coast of Virginia for example, off of where our Navy is based out in Norfolk.

Where I was frustrated was just the amount of attention that the Chinese gained when this balloon, which was visible by cell phones, just leisurely floated across the whole mainland in the United States. If it had been an American spying balloon — and I'm not saying we have those or not — but if there had been some American entity floating across all of China from Beijing to Shanghai down to Hong Kong, I'm not sure it would have been able to pass without being shot down.

What is the U.S. policy on China in the post-balloon era as you see it?

We have a China that's very aggressive on the military front. But where I think it is, even more importantly, aggressive, is on the technology development front. There will be places we have to work with China, but there are also the places where we are in a competition of our lifetime.

I think what's taking place is that this is a complete reversal of where we were for at least the first decade in the 21st century. I think most policymakers, myself included, thought that the more we brought China into the World Trade Organization, the more we cross-invested, the more that China would evolve into a less authoritarian regime and cooperate with the world's rules. And frankly, we were wrong.

Whether it is telecommunications, whether it is satellites, whether they're using tools like balloons to spy upon us, but more importantly, artificial intelligence, quantum computing, advanced energy development — at the end of the day, these companies answer to the Communist Party of China. This technology can also be used for nefarious purposes.

There are a host of areas where we need to still collaborate with China — things around the environment, for example. If we prohibit American semiconductor firms from selling legacy chips to Huawei phones — all we're doing is turning part of an American market share over to our Korean friends or Taiwanese friends or Japanese friends who have not put the same prohibitions in place. So, us acting unilaterally, we have to think it through.

Is it just about technological and economic competition? Or is it more than that? Is China a national security threat?

In a traditional national security vein, of course it is. China is building submarines, building planes.

But I actually think, God forbid we ever get into a conflict with China, I'm not sure it's going to be traditional military that is going to be used. It is about: Who's going to be able to take out each other's satellite system? Who's going to be able to shut down people's power grid? We should not underestimate the level of investment they're making and how this technological development crosses into national security.

There are two separate things we're talking about right now in the realm of intelligence regarding China — the intelligence surrounding the balloon and the intelligence about China considering sending lethal aid to Moscow.  What's your impression of how strongly those two pieces of intel point to China as being a real national security threat?

I think that the balloon phenomenon was, candidly, a mistake made by China. In terms of importance, it got publicized way beyond its value. It is a tiny concern compared to the potential of China selling arms to Russia. We now live in a world where satellite technology changes about every two years and the volume of satellites for spying and other purposes that China is putting up concerns me 100 times more than the balloon.

In terms of China, potentially sending lethal aid to Moscow — how does that compare to the longstanding concern about dual-use items being sent to Moscow?  

I don't want to sound glib, but it is a little bit in the eye of the beholder.

I think it's appropriate that Secretary Blinken and the administration have signaled very strongly that that trade of military aid — if it's ammunition, if it's artillery — that is something that we are all united on and that China should not do. But the amount of oil that China is buying from Russia to prop up the Putin regime, the level of the semiconductor chips that China, which has its own semiconductor industry, could sell to Russia to evade American or other sanctions — do you call that lethal aid? If that chip goes in a missile, one could call that at least a tool of lethality. This is kind of an ambiguous area that all countries have had as they thought about sanctions.

There's an argument out there that Republicans and GOP lawmakers on Capitol Hill have  dominated the China conversation in recent weeks and that their messaging seems to be clearer than those of Democrats. What do you think of that argument?

I'm happy to match my personal record of sounding the alarm about China with any member of Congress. Who started the classified roadshow briefings to American industry and academia back in 2017?

Simple knee jerk reactions — there needs to be a little bit more sophistication than that. [There is] a level of analysis that I'm not hearing from all my Republican friends who simply say anything, anyone, any place that ever touches China, de facto, must be a mistake or national security violation. That's not going to allow us to win this competition.

Thanks to editor Heidi Vogt and producer Andrew Howard.

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