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* Dissident case threatens to overshadow U.S.-China talks
* Case could mark personal test for Clinton
* U.S. seeks to balance rights, stability in China ties
By Andrew Quinn
WASHINGTON, April 30 (Reuters) - U.S. Secretary of State Hillary Clinton hoped to highlight stability during her trip to China this week, but instead flies into a diplomatic hurricane sparked by the dramatic escape of a blind Chinese human rights activist now believed to be under U.S. protection.
Clinton is due to depart Washington late on Monday for Beijing, where she will be joined by Treasury Secretary Timothy Geithner and other U.S. officials for high-level meetings with their Chinese counterparts on Thursday and Friday.
But all eyes will be on how Clinton handles the delicate case of Chen Guangcheng, who rights advocates say is sheltering at the U.S. embassy in Beijing after a daring flight from house arrest in his native Shandong province.
Speaking to reporters on Monday, Clinton declined to comment on the Chen case but pledged to press China's leaders on human rights issues.
"A constructive relationship includes talking very frankly about those areas where we do not agree, including human rights," Clinton said. "That is the spirit that is guiding me as I take off for Beijing tonight."
Managing the fallout will mark a personal test for Clinton, who has said she will step down at the end of the year after winning high public approval ratings as America's top diplomat.
Chris Johnson, an analyst at the Center for Strategic and International Studies, said the Chen case could quickly overwhelm the broader discussions if it is not resolved soon.
"It seems hard to me to fathom how they're going to focus on the many important geostrategic issues we've got - Syria, Iran, North Korea - plus the serious economic issues that they were going to focus on with this media circus going on."
A senior U.S. diplomat, Assistant Secretary of State Kurt Campbell, was sent to Beijing over the weekend in what analysts said was an attempt to broker a deal over Chen that could allow all sides to save face.
President Barack Obama, maintaining the strict U.S. official silence on the Chen case, declined to answer a question about it on Monday but said China would be stronger if it took steps to protect human rights.
Clinton included China on her first overseas trip as secretary of state in 2009, and has worked to stabilize ties between two economic giants that are often politically at odds.
Clinton's relationship with her chief Chinese counterpart, State Councilor Dai Bingguo, is said to be cordial, but she has clashed publicly with Beijing on issues including Syria and Internet freedom - drawing rebukes from China's state-run media.
Her task could be further complicated by a White House letter last week which indicated that the Obama administration may consider new arms sales to Taiwan. That could infuriate Chinese leaders already unsettled by the U.S. "pivot" toward stepped up engagement across the Asia-Pacific region.
Despite the friction, analysts said Clinton has earned a reputation among Chinese decision-makers as a firm but fair negotiator which may pay dividends as the two sides struggle to resolve the immediate impasse over Chen.
"Her overall management, attention to communication and ability to listen have made the prospect of this getting resolved a lot better," said Douglas Paal, a former senior U.S. government official now at the Carnegie Endowment for International Peace.
"There is a diplomatic way out of this, although the question is whether China has the political capacity to make a deal. The quieter we are officially, the better the outcome likely will be."
With the United States gearing up for the November presidential election and China also negotiating a political transition, both sides have clear interest in keeping one of the world's most important bilateral relationships on track.
The Chen case follows an incident in February when a Chinese official visited the U.S. consulate in Chengdu, launching a broader scandal that saw senior leader Bo Xilai removed from his top leadership post in one of the most divisive political upheavals in China in decades.
With yet another unexpected visitor now said to be holed up at a U.S. diplomatic facility, neither the U.S. nor the Chinese government has publicly commented on the Chen case and both have declared that this week's talks will take place as planned.
U.S. officials had suggested modest hopes for this year's meetings, even before the Chen storm broke.
There has been some progress on economic disputes, including Washington's demands for Beijing to allow its currency to appreciate further, do more to protect intellectual property rights and remove artificial barriers to its markets.
And officials also say China is gradually becoming more cooperative on major international issues such as the drive to pressure Iran and North Korea on their renegade nuclear programs and to defuse the mounting political crisis in Syria.
"The Chinese have taken steps - often just baby steps, but steps - on literally all of the big issues that concern us, so the administration can take some credit for that," said Nina Hachigian, a national security expert at the Center for American Progress, a liberal think-tank.
But other analysts say the annual meeting has achieved few concrete results, and that differences on human rights, Internet policy and the South China Sea could still set Washington and Beijing back on a collision course in years to come.