May 23, 2010 / 4:16 AM / 7 years ago

U.S. and China open talks to help steady economic ties

<p>Secretary of State Hilary Clinton gives a speech at a corporate event for Boeing in Shanghai May 23, 2010. U.S.Aly Song</p>

BEIJING (Reuters) - The United States and China formally open high-level talks on Monday intended to steady their vast and sometimes tense economic relationship, but North Korea threatened to emerge as a point of diplomatic contention.

Any feuding over Chinese exchange rate policies, however, appeared likely to be kept out of the limelight.

The two countries are holding a Strategic and Economic Dialogue (S&ED) in Beijing, and Secretary of State Hillary Clinton said they would cover many of the commercial and foreign policy issues that have sometimes created rifts between the world's biggest and third biggest economies.

She and some 200 U.S. officials attending the two days of talks, however, appeared eager to play down the tensions that unsettled relations in the first months of 2010, when Beijing denounced U.S. criticism of its Internet censorship, Washington's arms sales to Taiwan, and President Barack Obama's meeting with the Dalai Lama, Tibet's exiled leader.

"We want to take what is a positive relationship and make it more so. It's strong but it can be stronger," Clinton said in excerpts of an interview with Phoenix Television, a Hong Kong-based broadcaster, aired late on Sunday.

She said the issues up for discussion included bilateral economic ties, Iran and also North Korea, which faces international condemnation after South Korea said the North torpedoed its warship, the Cheonan, in late March.

South Korea said on Sunday it would take the case to the United Nations Security Council. Speaking in Tokyo on Friday, Clinton said the international community could not allow the Cheonan's sinking, which killed 46 sailors, to go "unanswered."

China is the sole major backer of North Korea, and has not publicly criticized Pyongyang over the sinking, instead issuing broad calls for restraint. Earlier this month, China hosted the North's leader, Kim Jong-il, on a visit.

Beijing's reluctance to censure its neighbor may become a point of division with Washington, especially if South Korea carries through on its vow to take the sinking to the United Nations Security Council.

The two nations also are expected to discuss Iran, which the United States accuses of pursuing nuclear weapons. Iran denies this.

<p>Secretary of State Hillary Clinton attends a corporate event for Boeing in Shanghai May 23, 2010.Aly Song</p>

Clinton on Sunday pressed senior Chinese officials to agree on a list of people and Iranian entities whose assets could be frozen in fresh U.N. Security Council resolution against Iran.

QUIET DISCUSSION OF YUAN

For now, contention over China's yuan exchange rate policies appears unlikely to break out in public at the talks.

Beijing officials have said they want only "quiet discussion" of U.S. complaints the Chinese currency is held too low in value, giving Chinese manufacturers an unfair advantage.

The Obama administration so far appears willing to go along in the hope that a quieter approach will give Beijing more political space to let its currency appreciate.

Treasury Secretary Timothy Geithner told reporters on Sunday that the two big economies needed to show they can act decisively.

"Meeting at this time allows us to demonstrate what is a substantial strength of both the United States and China -- a capacity to act quickly, to solve problems, to take initiative and to take a leadership role," he said in Beijing.

But he and other U.S. officials will be looking for signs that China will narrow the two countries' huge trade gap.

The annual U.S. trade deficit with China fell to $226.8 billion in 2009, down from a record $268.0 billion in 2008. But the Obama administration is keen to lift exports, and the deficit remains a point of friction with Beijing.

U.S. officials have sought to concentrate attention on policies that they claim may unfairly impede U.S. companies hunting for customers in China.

Additional reporting by Glenn Somerville; Editing by Michael Roddy

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