Obama: strains unless US,China balance growth

Mon Nov 9, 2009 8:49pm EST

*To succeed, China, U.S. have to work together-Obama

*He says he will raise currency issue with China

*Obama will ask Beijing to do more to open markets

*Also looking for progress on climate ahead of Copenhagen

*Rejects criticism of stance on human rights in China

By Simon Denyer and Caren Bohan

WASHINGTON, Nov 9 (Reuters) - The United States sees China as a vital partner and competitor, but the two countries need to address economic imbalances or risk "enormous strains" on their relationship, President Barack Obama said on Monday.

Three days before leaving on a nine-day trip to Asia, Obama said the world's two most powerful nations need to work together on the big issues facing the globe, and any competition between them has to be fair and friendly.

"On critical issues, whether climate change, economic recovery, nuclear nonproliferation, it is very hard to see how we succeed or China succeeds in our respective goals, without working together," he told Reuters in an interview.

Speaking in the Oval Office, he warned that the economic relationship between the two countries had become "deeply imbalanced" in recent decades, with a yawning trade gap and huge Chinese holdings of U.S. government debt.

Obama said he would be raising with Chinese leaders the sensitive issue of their yuan currency -- which is seen by U.S. industry as significantly undervalued -- as one factor contributing to the imbalances.

"As we emerge from an emergency situation, a crisis situation, I believe China will be increasingly interested in finding a model that is sustainable over the long term," he said. "They have a huge amount of U.S. dollars that they are holding, so our success is important to them."

"The flipside of that is that if we don't solve some of these problems, then I think both economically and politically it will put enormous strains on the relationship."

Excessive consumption and borrowing in the United States and aggressive export policies, high savings and lending from Asia fueled a global economic bubble which burst last year.

The United States is trying to persuade China to consume more at home, and to buy more U.S. goods in the process, while Washington pledges to save more and borrow less.

Leaders of the Group of 20 major rich and emerging economies pledged at a summit in Pittsburgh in September to aim for policies to ease economic imbalances. Obama said one of the goals of his trip was to build on that agreement.

LOOKING FOR MORE OPEN MARKETS

The Obama administration has resisted domestic pressure to brand China a currency manipulator, but has slapped tariffs on Chinese tires, steel pipes and other products.

Obama said he would be telling Beijing it needed to do more to open its markets.

"Our manufacturers, I think, would have legitimate concerns about our ability to sell into China," he said, emphasizing that boosting U.S. sales oversees was a crucial part of his strategy to revitalize the economy and create jobs.

Obama took office in January when the U.S. economy was mired deep in recession. Although there have been mounting signs of economic recovery, unemployment is stubbornly high. The U.S. jobless rate jumped to 10.2 percent in October, the highest rate in 26 years.

"It is particularly important for us when it comes to Asia as a whole to recognize that in the absence of a more robust export strategy it is going to be hard for us to rebuild our manufacturing base and employment base in this country," Obama said in the 21-minute interview.

SEEKING A DEAL ON CLIMATE CHANGE

Obama said addressing climate change would also be a key part of the talks with his Chinese counterpart, Hu Jintao, and added the world's two biggest emitters of carbon dioxide needed to find common ground if global talks on the issue in Copenhagen in December are to succeed.

The key, he said, was for the U.S. and China to reach a framework agreement other nations could buy into.

"I remain optimistic that between now and Copenhagen that we can arrive at that framework," he said, adding he would travel to Denmark next month if he felt there was a chance of progress.

"If I am confident that all of the countries involved are bargaining in good faith and we are on the brink of a meaningful agreement and my presence in Copenhagen will make a difference in tipping us over edge then certainly that's something that I will do," Obama said.

Obama will be visiting China for the first time. But the trip will mark his third bilateral meeting with China's President Hu.

The Obama administration has sought to build on a policy begun in the Bush administration of encouraging Beijing to take on a higher-profile role in global affairs.

But in turn the United States expects China to use its clout responsibly on issues from the global economy to the Iranian and North Korean nuclear disputes.

One of the clearest signals of the administration's desire to give China and other large, fast-growing economies a bigger role was the decision -- adopted at the Pittsburgh G20 summit -- to make the G20 the premier forum for discussing global economic issues.

'A VITAL PARTNER'

A Thomson Reuters/Ipsos poll published last week showed that while Americans view China as important, many are wary.

Thirty-four percent of Americans chose China as the "most important bilateral relationship" -- ahead of Britain and Canada. Yet when asked to characterize China, 56 percent saw it as an adversary while only 33 viewed it as an ally.

"I see China as a vital partner, as well as a competitor," Obama said.

"The key is for us to make sure that that competition is friendly, and it's competition for customers and markets, it's within the bounds of well-defined international rules of the road that both China and the United States are party to but also that together we are encouraging responsible behavior around the world."

Obama has been accused by some of soft-pedaling on China's human rights record, criticism he rejected.

"We believe in the values of freedom of speech, freedom of press, freedom of religion, that are not just core American values but we believe are universal values," he said.

"And there has not been a meeting with the Chinese delegation in which we did not bring these issues up. That will continue."

Obama's Asia trip will take him to Japan, Singapore, China and South Korea.

(Editing by Frances Kerry)








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