Obama in China grapples with economic strains

BEIJING (Reuters) - U.S. President Barack Obama wrangles over trade and currency policy with his Chinese counterpart Hu Jintao on Tuesday, with Iran and North Korea competing for attention at the summit of the two global powers.

The future of the Chinese yuan currency is expected to be on the agenda, following days testy exchanges over what Washington says is a serious undervaluing of the currency stoking global economic imbalances.

Hu has shown little patience for criticisms of Beijing's currency policy, and he and other Chinese officials have instead dwelt on what they have called the protectionist impulses and lax fiscal policies of the United States.

But even with a whole morning to talk, Obama and Hu will have a crowded agenda, underscoring the breadth and complexity of ties between their countries -- respectively the world's biggest and third biggest economies.

Both governments are key players in frustrated efforts to end North Korea's nuclear weapons program, and Obama is also looking for more support from China to press Iran over its nuclear activities.

Other topics to be talked about include human rights, as well as efforts to forge a new climate pact, following acknowledgement that a legally-binding agreement will not energy from negotiations in Copenhagen next month.

Both governments have tried to strike a friendly tone before what could otherwise be a combative summit.

In commercial hub Shanghai on Monday, Obama told Chinese students he did not fear their nation's rise, as he began his first visit to China since taking office earlier in the year, but called for more balanced trade between the two sides.

"This trade could create even more jobs on both sides of the Pacific while allowing our people to enjoy a better quality of life and as demand becomes more balanced, it can lead to even broader prosperity."

But when the two presidents sit down in the Great Hall of the People -- China's grandiose parliament building -- their current economic strains will loom large.

At a gathering of Asia-Pacific leaders in Singapore over the weekend, Hu pointedly ignored international calls for his government to help ease global imbalances by raising the value of the yuan, making Chinese exports relatively more expensive.

He and other senior Chinese officials have instead accused other countries -- implicitly including the United States -- of embracing damaging trade protectionism aimed at Chinese goods.

On Monday, Chinese Commerce Ministry spokesman Yao Jian was equally blunt in rejecting calls to raise the value of the yuan, which would make the country's exports relatively more expensive.

China has had a huge trade surplus with the United States, and is also the largest foreign holder of U.S. government bonds.

The U.S. trade deficit with China widened 9.2 percent in September to $22.1 billion, the highest since November 2008, according to U.S. data released last week.

Obama has cast his visit as an effort to win trust from a government and a public often wary of U.S. intentions toward the rising Asian superpower and world's third biggest economy.

"I'm hopeful that in my meetings with President Hu ... both the United States and China can work together to try to reduce conflicts that are taking place," he said.

But Obama also made a call for greater freedom of expression, a touchy issue in a country frequently criticized in Washington for trampling on issues like religious rights.

"These freedoms of expression and worship of access to information and political participation, we believe are universal rights, they should be available to all people including ethnic and religious minorities," he said.

(Writing by Ben Blanchard; Editing by David Fox)