"They shoot down our surveillance balloons, giving us precedent to shoot down their high altitude drone planes or satellites in the future."
It may not be exactly what they have in mind, but I think it's the right way to think about the question - they are engineering scenarios which work to their advantage no matter how the US responds. US shoots them down? Play outraged. US leaves them alone? US looks weak.
I don't think we know enough about this "unknown object" to definitively say what it could and couldn't do.
We need to move past this whole "why use spy balloons when we have satellites" thing. Even Scott Manley repeated it.
The USA has what are likely the most capable surveillance satellites in the world yet the USA still employs spy planes.
For one thing, RF signals suffer from path loss over distance. The difference is >140km in distance. That's a lot of signal loss. Another factor is loiter time.
The balloon floated about 100x closer to the surface than a satellite in low-Earth orbit and travelled much slower, making it potentially easier to collect signals/images.
It's more likely a coordinated event to get people to talk about something other than covid and the last 3 disastrous years. Lets be honest here, neither china nor the US wants people asking uncomfortable questions about covid. Now that the covid era appears to be over, what better way to distract people than "war".
They did the same thing with 9/11. Uncomfortable questions about 9/11 was overshadowed by war and iraqi "wmds". Eventually people forget or move on.
Call me a cynic, but china ends covid lockdowns and all of a sudden we get "surveillance" balloons. And the entire media apparatus has us talking about silly balloons instead of wondering what the last 3 years of covid was about. My guess was a staged "terrorist" attack somewhere to transition us from the covid news cycle. Turns out we got balloons instead. Whatever works in the end.
at least in the US, I don't think anyone is really interested in covid anymore enough to require any distraction. Maybe that argument makes sense in China.