(For full coverage of U.S.-China relations, click [ID:nCHINA])
* Obama will meet the Dalai Lama - White House
* Beijing says will pursue sanctions over Taiwan arms
* U.S. says China has over-reacted, eyes dialogue
* China not forthcoming on specifics of retaliation (Adds State Department comment)
By Chris Buckley and Doug Palmer
BEIJING/WASHINGTON, Feb 2 U.S. President Barack Obama still plans to meet the Dalai Lama, the White House said on Tuesday, despite China's warning that such a meeting would hurt ties already strained by U.S. weapons sales to Taiwan.
Digging in on two points of discord, China vowed to impose unspecified sanctions against U.S. companies selling arms to Taiwan and said any meeting between Obama and the exiled Tibetan Buddhist leader would hurt bilateral ties.
The White House shrugged off Beijing's warning.
"The president told China's leaders during his trip last year that he would meet with the Dalai Lama and he intends to do so," White House spokesman Bill Burton told reporters traveling with Obama to New Hampshire.
"We expect that our relationship with China is mature enough where we can work on areas of mutual concern such as climate, the global economy and non-proliferation and discuss frankly and candidly those areas where we disagree."
China has become increasingly vocal in opposing meetings between foreign leaders and the Dalai Lama, who Beijing deems a dangerous separatist. A meeting between the Tibetan leader and Obama would raise tensions between the world's biggest and third-biggest economies.
Ties between the United States and China have also soured over trade and currency quarrels, cyber security and control of the Internet, and Beijing's jailing of dissidents. [ID:nTOE60T00O]
U.S. State Department spokesman P.J. Crowley said Washington wanted to "work through" disputes in various bilateral meetings the United States has with China.
"You have two of the most powerful nations on earth and our interests coincide in many areas and our interests collide occasionally in a handful of those," he told reporters.
A senior Democratic senator said on Tuesday he had asked 30 U.S. companies, including Apple (AAPL.O), Facebook and Skype, for information on their human rights practices in China in the aftermath of Google's (GOOG.O) decision to no longer cooperate with Chinese Internet censorship efforts.
"Google sets a strong example in standing up to the Chinese government's continued failure to respect the fundamental human rights of free expression and privacy," Assistant Senate Majority Leader Dick Durbin said. [ID:nN02244473]
Google, the world's top Internet search engine, said last month it would not abide by Beijing-mandated censorship of its Chinese-language search engine and might quit the Chinese market entirely because of cyber attacks from China.
Recent cyber attacks on Google were a "wake-up call" and neither the government nor the private sector can fully protect the U.S. infrastructure, Dennis Blair, director of national intelligence, said on Tuesday. [ID:nN02104125]
"Malicious cyber activity is occurring on an unprecedented scale with extraordinary sophistication," he said in written testimony for a Senate intelligence committee hearing.
"China's aggressive cyber activities" were among challenges posed by the Chinese military, Blair added.
There had been expectations that Obama would meet the Dalai Lama as early as this month, when the Tibetan leader visits the United States. The White House has not announced a schedule.
Zhu Weiqun, a vice minister of the United Front Work Department of China's ruling Communist Party, said Beijing would vehemently oppose a meeting.
"If the U.S. leader chooses this time to meet the Dalai Lama, that would damage trust and cooperation between our two countries, and how would that help the United States surmount the current economic crisis?" said Zhu, whose department steers party policy over ethnic issues.
China routinely opposes meetings between the Dalai Lama and foreign leaders, especially after violent unrest spread across Tibetan areas in March 2008. Beijing blamed the Dalai Lama's "clique" for the turmoil, a charge he repeatedly rejected.
Previous U.S. presidents, including Obama's predecessor George W. Bush, have met the Dalai Lama, drawing angry words from Beijing but no substantive reprisals.
But when French President Nicolas Sarkozy would not pull out of meeting the Dalai Lama while his country held the rotating presidency of the European Union in late 2008, China hit back by canceling a summit with the EU. [ID:nPEK170876]
The Dalai Lama has said he wants a high level of genuine autonomy for his homeland, which he fled in 1959. China says his demands amount to calling for outright independence.
China recently hosted talks with envoys of the Dalai Lama but they achieved little. [ID:nTOE61008S]
The United States says it accepts Tibet is a part of China but wants Beijing to sit down with the Dalai Lama to address their differences over the region's future.
TAIWAN ARMS SALES
Beijing is already irate over U.S. proposals last week to sell $6.4 billion of weapons to Taiwan, the island that China treats as an illegitimate breakaway province.
The United States switched diplomatic recognition from Taipei to Beijing in 1979 but Washington remains Taiwan's biggest backer and is obliged by the 1979 Taiwan Relations Act to help in the island's defense. [ID:nTOE610003]
Blair told the Senate intelligence hearing that China-Taiwan ties were now "relatively stable and positive" with progress on economic deals across the Taiwan Strait.
"Nevertheless, the military imbalance continues to grow, further underscoring the potential limits to cross-Strait progress," he said.
Chinese Foreign Ministry spokesman Ma Zhaoxu on Tuesday repeated Beijing's threat to impose "corresponding sanctions" against U.S. companies that sell arms to Taiwan, saying the firms had "ignored China's opposition."
He offered no details on how China would impose sanctions.
Companies that could be affected by Chinese sanctions include Sikorsky Aircraft Corp, a unit of United Technologies Corp (UTX.N); Lockheed Martin Corp (LMT.N); Raytheon Co (RTN.N); and McDonnell Douglas, a unit of Boeing Co (BA.N).
Bruce Lemkin, deputy under-secretary of the U.S. Air Force, said China had over-reacted to the arms sales.
"The U.S. has been consistent with our stated policy and we carry out those policies," he said. "So certainly we believe that China should continue to work with us on issues of mutual concern and to work with Taiwan."
China says the arms dispute will also damage cooperation with the United States over international issues. Washington has sought stronger Chinese support over several hotspots, chiefly the nuclear ambitions of Iran and North Korea.
A former senior U.S. diplomat earlier told Reuters that China may not follow up strong words with strong measures.
"Let's watch what they do, not what they say, because sometimes tough words in China are a substitute for tough action," said Susan Shirk, a professor specializing in Chinese foreign policy at the University of California, San Diego. (Additional reporting by Arshad Mohammed and Adam Entous in Washington, Steve Holland in New Hampshire, Simon Rabinovitch in Beijing and Nopporn Wong-Anan in Singapore; Writing by Paul Eckert; Editing by John O'Callaghan)