China's Hu rapped by Congress, assures U.S. in speech

WASHINGTON Thu Jan 20, 2011 6:37pm EST

1 of 18. China's President Hu Jintao (L) meets with U.S. Senate Majority Leader Harry Reid (D-NV) prior to a meeting with senators on Capitol Hill in Washington January 20, 2011.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Chinese President Hu Jintao got an earful of U.S. lawmakers criticism on North Korea and human rights on Thursday, but tried to assure the United States that China's military and trade policies were not a threat.

Hu wrapped up the Washington leg of a four-day state visit with a call on U.S. lawmakers, followed by a policy speech that stressed China-U.S. collaboration and played down some of the disputes that roiled ties in 2010.

"We do not engage in an arms race or pose a military threat to any country. China will never seek hegemony or pursue an expansionist policy," he told a gathering hosted by the U.S.-China Business Council.

On trade, Hu highlighted figures that showed that cheap Chinese exports had saved American consumers $600 billion over the past decade and said his country has become the biggest source of profits for many U.S. firms.

"Even in 2008 and 2009, when the international financial crisis was most severe, over 70 percent of American companies in China remained profitable," he said a day after the two countries signed deals they said were worth $45 billion.

Hu did not address the currency issue that has exercised many U.S. lawmakers, who argue that China keeps its yuan weak to boost exports -- costing millions of U.S. jobs and increasing a trade gap that Washington puts at $270 billion.

President Barack Obama urged Hu during their White House summit on Wednesday to let the value of the yuan rise against the dollar.

Vice President Joe Biden said "significant discussions" in private about the yuan with Hu's delegation showed him that the Chinese understand they must work on the currency dispute that is a major irritant between the world's top two economies.

"They indicate that they understand that -- that they have to work on it," he said. Asked whether Hu made any commitments, Biden replied: "Nothing specific."

DO BETTER ON RIGHTS

In morning meetings with Hu on Capitol Hill, members of Congress zeroed in on human rights and trade to underscore the huge gaps between Beijing and Washington.

"Chinese leaders have a responsibility to do better and the United States has a responsibility to hold them to account," John Boehner, the new Republican speaker of the House of Representatives, said in a statement after meeting Hu.

Analysts have called Hu's state visit the most significant by a Chinese leader in 30 years given China's growing military and diplomatic clout. But it comes at a time of strains over everything from economic policy and climate change to the nuclear ambitions of North Korea and Iran.

Two weeks before Hu's visit, U.S. Defense Secretary Robert Gates warned that advances by China's military in cyber and anti-satellite warfare technology could challenge U.S. forces in the Pacific. China also ran a test flight of a new stealth fighter and unveiled advances in anti-ship ballistic missiles.

Lawmakers said they urged Hu to take a stronger line on North Korea, hoping to use Beijing's influence over Pyongyang to ease tensions on the Korean peninsula and resume aid-for-disarmament talks.

Underlining China's importance to the global economy, data on Thursday showed its annual growth quickened in the fourth quarter of last year to 9.8 percent, defying expectations of a slowdown.

YUAN "SUBSTANTIALLY UNDERVALUED"

As U.S. voter anger simmers with unemployment riding above 9 percent, lawmakers have threatened new tariffs to punish Beijing for policies that critics say undervalue the yuan by up to 40 percent against the dollar.

In the past week, China's central bank has repeatedly set the mid-point for the yuan at record highs in keeping with a policy of strengthening it during important diplomatic events. But China has resisted demands for faster appreciation.

While House lawmakers skipped the currency question in their meeting with Hu, Senate Majority leader Harry Reid did raise it with the Chinese leader, an aide said.

And the U.S. Treasury maintained the pressure, with Assistant Treasury Secretary Charles Collyns saying Beijing has kept the yuan "substantially undervalued."

Rick Larsen, the Democratic co-chairman of the bipartisan U.S.-China Working Group in the House, said China must get serious about improving U.S. access to its huge domestic market and allowing the yuan to rise.

"This puts U.S. companies at a disadvantage and unfairly tilts the playing field toward domestic Chinese companies," he said in a statement.

But Representative Kevin Brady, chairman of the trade subcommittee of the House Ways and Means Committee, said he and other Republicans intend to focus on engaging with China on a broad range of trade issues, not just the currency dispute.

Currency is "not the silver bullet that many make it out to be and, for many American businesses trying to compete to win in China, not only is it not helpful, it distracts from tearing down other barriers that would provide us U.S. jobs," he said.

NEW CHAPTER

State media in China lapped up the pomp of the visit but largely avoided mention of Wednesday's rare news conference by the two presidents, where Hu was peppered with questions about the yuan and human rights.

Newspapers splashed photos of Hu with Obama across their front pages, with headlines touting a "new chapter in relations" after the $45 billion in deals that seemed aimed at quelling anti-Chinese sentiment in the United States.

The Washington Post in its lead editorial lambasted Obama for what it said was his lack of candor when asked about human rights by reporters at the joint press conference.

Obama, not Hu, "responded in a perfunctory manner, offered excuses for Beijing and concluded that disagreement on human rights 'doesn't prevent us from cooperating in these other critical areas,'" the Post said.

Neither Boehner nor Reid attended Wednesday's White House dinner for Hu, who was called "a dictator" by the Senate majority leader in an interview this week. Senate Republican leader Mitch McConnell skipped the Hu visit entirely.

Senator John McCain, the 2008 Republican presidential candidate, and former Democratic House speaker Nancy Pelosi led the effort to put pressure on Hu over human rights in their meetings, congressional aides said, illustrating the bipartisan nature of concern over China's record.

(Writing by Paul Eckert; Additional reporting by Steve Holland, Rick Cowan, Susan Cornwell and Mark Felsenthal in Washington, Sui-Lee Wen, Kevin Yao, Ben Blanchard, Sabrina Mao and Michael Martina in Beijing and Chen Yixin in Shanghai; Editing by Anthony Boadle)