UPDATE 2-China leader-in-waiting Xi woos and warns U.S.

Wed Feb 15, 2012 5:12pm EST

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By Chris Buckley and Doug Palmer

WASHINGTON, Feb 15 (Reuters) - China's leader-in-waiting Xi Jinping wooed and warned the United States on Wednesday, offering deeper cooperation on trade and global troublespots while demanding Washington heed Beijing's demands on Tibet and other contentious "core interests."

Xi, who is almost sure to become China's next president in just over a year from now, laid out his views on ties with the United States in the keynote speech of his visit to Washington.

His message was dominated by reassuring vows about more balanced economic ties and more international cooperation. But he also underscored Beijing's impatience with U.S. policies on Taiwan and Tibet -- issues where many Chinese citizens expect their leaders to show they will stand up to foreign pressure.

"The world is currently undergoing profound changes, and China and the United States face shared challenges and shoulder shared responsibilities in international affairs," Xi told a ballroom crowded with U.S. business executives, academics and policy-makers involved with China.

"We should further use bilateral and multilateral mechanisms to enhance coordination between China and the United States on hotspots, including developments on the Korean peninsula and the Iran nuclear issue," said Xi.

Xi's visit to United States this week has given him a chance to boost his international standing before his likely promotion to head of China's ruling Communist Party later this year and president in early 2013.

Although his speech revealed no new policies, his offer to work with Washington on dealing with Iran's and North Korea's nuclear ambitions could ease U.S. worries that Xi could drive foreign policy in a more hawkish direction.

Yet even as Xi continued his U.S. visit, both sides nudged each other on some of the issues that have fanned friction.

President Barack Obama took aim at China's trade policies, saying he will not stand by when American's competitors "don't play by the rules." And members of Congress pressed Xi on China's detentions of human rights activists.

The Chinese vice president offered his own warnings about Tibet and Taiwan, two territories where Beijing fears that it claims could be undermined by Western pressure.

"History demonstrates that whenever each side handles relatively well the issues bearing on the other side's core and major interests, then Sino-U.S. relations are quite smooth and stable. But when it is the contrary, there are incessant troubles," he said.

Washington should "abide by the one-China policy and take concrete actions to oppose Taiwanese independence," he said.

"We also hope that the United States will truly implement its recognition that Tibet is part of China and its vow to oppose Tibetan independence, acting prudently in issues concerning Tibet," he added.

In early 2010, the Obama administration's decision to move forward with proposed arms sales to Taiwan triggered vehement criticism from Beijing, including warnings of sanctions against U.S. companies involved in the sales.

Those warnings petered out, but Xi made clear that Taiwan remains an acute concern for Beijing's dealings with Washington.

Tensions over Chinese control of Tibet have flared in past months when a succession of protests and self-immolations have exposed volatile discontent. Chinese officials have blamed those tensions on separatists or supporters of the Dalai Lama, the exiled Buddhist leader of the region.

Xi also acknowledged the Obama administration's recent "pivot" toward Asia, but warned it not to push too far.

"China welcomes the United States playing a constructive role in promoting the peace, stability and prosperity of the Asia-Pacific region, and at the same time we hope the U.S. side will truly respect the interests and concerns of countries in the region, including China," said Xi.

"SPEAKING FRANKLY"

Xi, 58, is poised to become China's next leader following a decade in which it has risen to become the world's second largest economy while the United States has fought two wars and endured the deepest and longest recession since the Great Depression that sapped its resources.

Xi met with House of Representatives Speaker John Boehner and Senate Majority Harry Reid on Wednesday morning and after his speech headed to Iowa for the next leg of his trip, which finishes later this week in Los Angeles.

Boehner's office said his staff delivered a letter on the case of Gao Zhisheng, a dissident and human rights lawyer imprisoned in China. The House Speaker also expressed disappointment at China' veto of a U.N. Security Council resolution on Syria.

Many U.S. lawmakers complain that China's yuan currency is significantly undervalued, giving Chinese companies an unfair price advantage that helped lift the U.S. trade deficit with China to a record $295.5 billion in 2011.

Xi said currency reforms already taken by Beijing helped boost U.S. exports to China to more than $100 billion in 2011 and has significantly reduced China's overall trade surplus.

"China has become the United States' fastest growing export market," Xi said. "The trade surplus as a proportion of GDP has been falling from over seven percent to two percent, at a level internationally recognized as reasonable."

U.S. Treasury Secretary Geithner acknowledged on Wednesday that Beijing is gradually letting its currency rise, but not fast enough to please the United States.

"We think they have some ways to go, we would like them to move more quickly," he told a congressional panel.

Xi repeated Beijing call for the United States to eliminate restrictions of exports of high-technology civilian goods, which he said would help bring trade into balance.

Beijing has given the Obama administration a framework for promoting two-way trade and investment, he said.

"Speaking frankly, an important aspect of addressing the imbalance in Chinese-U.S. trade is the United States' own economic policies and structural adjustment," he said.

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