U.S. and China spar on rights, soften tone on economy

U.S. officials criticized China on Monday for its crackdown against dissidents but the economic powers agreed on the need to work together to boost global growth at the start of two days of talks.

The meetings covering economic and diplomatic issues come as the world's two largest economies grapple with a range of policy disputes -- from human rights to the value of the yuan -- that threaten cooperation on global economic matters.

Both sides pledged to use the Washington talks to shore up relations, but Vice President Joe Biden was quick to raise concerns about a crackdown on dissidents in China.

"We have vigorous disagreement in the area of human rights," he said as the Strategic and Economic Dialogue began.

On the topic of the economy, Washington pressed China on familiar themes, saying Beijing should let its yuan currency rise faster and do more to spur domestic demand.

But U.S. officials also welcomed reforms China has taken and admitted the U.S. budget needed tightening.

Chinese Vice Premier Wang Qishan said that while the global economy was slowly gaining strength "the situation is still complicated and fraught with uncertainties".

Japan's earthquake, excess liquidity in global money markets and Mideast unrest "have all seriously damaged market confidence", Wang said.

By this time next year, both countries are expected to be focused on domestic politics as campaigning for the U.S. presidential election intensifies and the process of choosing a successor to Chinese President Hu Jintao gets underway.

That has added impetus to the talks on ways to smooth areas of potential trouble before policymakers' attention becomes distracted by internal affairs.

Strong-Dollar Talk

Top Chinese officials were careful not to turn the meeting into a public mud-slinging match.

Wang, co-chair of the economic talks with U.S. Treasury Secretary Timothy Geithner, cautioned it takes time to correct economic imbalances -- such as China's bulging trade surpluses and corresponding deficits in the United States -- and implied that Washington had more to do than Beijing.

"The key to a global economic recovery still lies with the United States," Wang said. "We are pleased to note that the U.S. economy is gradually improving and the Chinese economy as a whole is in good shape."

China, the United States' biggest creditor, is concerned that its vast holdings of dollar-based assets could suffer as the U.S. currency declines.

Chinese officials pushed back on U.S. claims that the yuan, also called the renminbi, was undervalued and gave Chinese exports an unfair trade advantage.

But data released on Tuesday showed China's trade surplus in April widened to $11.4 billion, its highest level since November, a change likely to ignite fresh criticism of Beijing's currency policies.

"This number will likely add to the pressure from Washington for Beijing to allow faster currency appreciation, but more importantly should persuade Chinese policymakers that a stronger yuan can be tolerated by the economy," said Brian Jackson, an economist with the Royal Bank of Canada in Hong Kong.

Beijing turned aside chances to openly criticize the loose U.S. monetary and budgetary policies it has argued in the past were weakening the dollar.

"We've already become accustomed to fluctuations between exchange rates," China's central bank governor, Zhou Xiaochuan, told reporters. "At the same time, we've noted that the Treasury Department has repeatedly stressed the view that a strong dollar is in the interests of the United States and the world."

However, asked in a public television interview whether a stronger yuan was needed to combat inflation, Wang called inflation "the most pressing problem" Beijing faced and said multiple levers would need to be employed to address it.

The yuan has risen about 5 percent since being freed from a peg to the U.S. dollar last June, an amount U.S. producers consider far too little.

A senior U.S. official said Treasury Secretary Timothy Geithner focused more on getting China to open up to U.S. investment and to reduce barriers to imports, even as he restated long-standing concerns on the yuan.

Earlier, Geithner said steps to bring about better-balanced growth between the two nations "are not in conflict, and the strengths of our economies are still largely complementary."

He cited what he called "very promising changes in the overall direction of Chinese economic policy."

Fears of Unrest

Human rights in China has become an edgier issue in the past few months because of Beijing's moves to squelch dissent, seen as a bid to prevent the type of unrest that erupted in the Middle Ease and North Africa.

Since February, China has detained dozens of dissidents, human rights advocates, and prominent grass-roots protesters.

Secretary of State Hillary Clinton publicly voiced displeasure with China's moves, and a senior U.S. official said she had "very candid and very honest" private discussions on the matter with Chinese State Councilor Dai Bingguo.

At a White House meeting with Chinese delegation leaders, President Barack Obama also urged Beijing to respect freedom of expression, religion and access to information.

China's leaders say U.S. complaints about its human rights record are illegitimate meddling.

"For the U.S. raising the issue is politically necessary, but I think it is probably more effective in a closed-door meeting than in public -- it can only cause resentment on the Chinese side," said Jia Qingguo, associate dean at Peking University's School of International Studies.

On their first day, Clinton said the measure of success for the Washington talks would be specific progress on issues of contention. But with most of the discussions taking place behind closed doors, it was unclear what, if any, breakthroughs had been reached.

Republicans in the House of Representatives, keen to keep the pressure on Beijing to allow for a faster appreciation of the yuan and opening of its markets, wrote to Geithner and Clinton arguing China's policies were hurting U.S. companies.

Senator Sherrod Brown, an Ohio Democrat, also charged China was manipulating its currency and said it "has gone on for too long" and may need be to dealt with through legislation.

[Source: By Glenn Somerville and Chris Buckley, Reuters, Washington, 10May11]

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