Given the Chinese have been complaining to the UN for the last year about American Low Earth Orbit satellites spying on them (Starshield, Space Development Agency, etc..) this balloon thing is pretty clever.
The US would deorbit everything China ever put into space if they started shooting at satellites. Those satellites are part of the strategic triad and would be a direct threat to the US nuclear umbrella. The AEGIS systems off the Chinese coast would take care of any attempts to add satellites back into space.
See Space Development Agency https://en.m.wikipedia.org/wiki/Space_Development_Agency
That's what China has been most upset about at United Nations.
That happened last month in November 2022. It mysteriously destroyed itself.
(One could make the same argument for the U.S., but that’s not the open question at the moment.)