China's top diplomat Wang Yi on Saturday blasted the United States's reaction to what Washington has called a Chinese spy balloon as "hysterical and absurd", in uncharacteristically strong remarks against the top Western power.

Addressing a gathering of world leaders at the Munich Security Conference, Wang said US President Joe Biden's administration has a "misguided" perception of Beijing.

And he accused Washington of trying to "smear" the Asian giant while it itself was implementing policies that ran counter to its paradigms such as free trade.

"There are many balloons from many countries in the sky. Do you want to down each and every one of them?" Wang charged.

"We urge the United States not to do such preposterous things simply to divert attention from its own domestic problems."

The United States has been in a state of alarm since a huge white balloon from China was spotted over a series of top secret nuclear weapons sites, before being shot down just off the east coast on February 4.

Beijing denies it uses spy balloons and says the craft was for weather research. Subsequently it accused Washington of sending its own espionage balloons over its territory -- something that the US has denied.

The spate had led US Secretary of State Antony Blinken to abruptly cancel a rare visit to China.

With Blinken also in Munich for the conference, all eyes are on whether both sides succeed in setting up a meeting.

But asked if he was planning a huddle with the US delegation, Wang reacted combatively.

Washington, he said, had the wrong view of China as a serious geopolitical challenge and a threat to the United States.

"This is a misguided perception of China and with this perception, the United States is using all of its means to smear and clamp down China, and is co-opting other countries to do the same," he said.

Wang accused the US instead of "100 percent protectionism, 100 percent self-servingness, 100 percent unilateral action" in its own economic policies like the Chips Act.

"We hope the US side would take a pragmatic and proactive attitude towards China and work together with China to return our bilateral ties to accept a track of sound development," he added.

'Don't make same mistake'

After four years of antagonistic relationship with China under his predecessor Donald Trump, US President Joe Biden has made a priority of resetting relations with Beijing -- which he describes as Washington's biggest competitor.

But tensions flared last year after Nancy Pelosi, then the leader of the US House of Representatives, visited Taiwan -- the self-governing democracy island claimed by Beijing.

That project may be tested again soon, with a high-level Pentagon official reportedly planning to visit Taiwan in the coming days.

Russia's invasion of Ukraine has also led Western powers to cast a wary eye on the relations between Russian leader Vladimir Putin and China's President Xi Jinping -- who call each other "friends".

Also in Munich, NATO chief Jens Stoltenberg said "Beijing is watching closely to see the price Russia pays, or the reward it receives for its aggression".

"What is happening in Europe today could happen in East Asia tomorrow," he warned.

Stoltenberg also said that Moscow's incursion has exposed the dangers of Europe's over-reliance on authoritarian regimes and should serve as a lesson as the continent orientates its relations with Beijing.

"We should not make the same mistake with China and other authoritarian regimes," he cautioned.