Obama, Hu Vow Cooperation Amid Divisions Over Currency, Trade

Nov. 18 (Bloomberg) -- President Barack Obama and Chinese President Hu Jintao left their formal meetings in Beijing yesterday with promises of increased cooperation amid lingering friction over currency, trade and human rights.

Obama said the world’s most populous nation played a vital role in helping end a global recession and will be a key partner in dealing with challenges from curbing the nuclear ambitions of Iran and North Korea to combating climate change.

“The relationship between the United States and China has never been more important to our collective future,” Obama said in an appearance with Hu at the Great Hall of the People.

Hu, speaking first, said through a translator that the U.S. and China “share extensive common interests” on issues that affect “mankind’s peace and stability and development.”

While the U.S. president wraps up his first trip to China today pledging to continue the strategic and economic dialogue between the two countries, the two countries’ biggest differences remain unresolved. Obama called on Hu to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis.

“I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said. “Doing so based on economic fundamentals would make an essential contribution to the global rebalancing effort.”

Yuan Peg

Hu, in his remarks, made no mention of the yuan peg to a weakening dollar, which has forced central banks across Asia to sell their currencies to limit appreciation and maintain export competitiveness with China. The Indonesian rupiah gained 11 percent against the yuan in the past six months, and the Korean won rose 9.4 percent.

The yuan has been pegged at about 6.83 to a dollar since July 2008. Maintaining the peg has also helped make China the biggest foreign holder of U.S. government debt, with $797.1 billion in August, up 10 percent from Jan. 1, Treasury data show.

In a briefing, China’s vice foreign minister, He Yafei, told reporters that the stability of the exchange rate has helped settle financial markets.

‘Trade Frictions’

Hu said both parties will work on easing “trade frictions.” He also stressed that the two countries “need to oppose and reject protectionism in all its manifestations.”

America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances.

It also has fueled calls for action against China from lawmakers, unions and some manufacturers. Obama’s administration responded by imposing duties of 35 percent on $1.8 billion worth of automobile tires imported from China, and duties of as much as 99 percent on Chinese steel pipes, in a case brought by U.S. Steel Corp. and other companies.

While Obama stresses cooperation, he faces skepticism at home. Seven in 10 people polled for CNN Nov. 13-15 said they consider China an economic threat to the U.S. China also represents unfair competition for U.S. companies, according to 67 percent of the 1,014 Americans surveyed, while 27 percent viewed China as a potential market.

Wider Relationship

The U.S.-China relationship “goes far beyond any single issue,” Obama said.

“The major challenges of the 21st century, from climate change to nuclear proliferation to economic recovery, are challenges that touch both our nations and challenges that neither of our nations can solve by acting alone,” Obama said.

Obama said the U.S. and China, the two largest consumers of energy, made progress on climate change. With expectations for a global treaty on emissions coming out of a summit in Copenhagen next month now gone, Obama and Hu agreed to move forward on a new two-stage plan that may aim to have an agreement next year.

On North Korea, Obama said he thanked Hu for China’s efforts to bring North Korea back into negotiations aimed at dismantling its nuclear weapons that also include Japan, South Korea and Russia.

“North Korea has a choice,” Obama said, between further isolation and provocation or becoming a full part of the international community, “which can give a better life to its people.”

Iran Concerns

On Iran, Obama said, he and Hu agreed that government in Tehran must provide solid and verifiable assurances that its nuclear program is peaceful.”

If Iran “fails to take this opportunity,” Obama said, “there will be consequences.”

China has balked at further sanctions against Iran. Hu reiterated that China seeks to resolve the dispute through negotiations.

Obama also addressed human rights, repeating language he used Nov. 16 when addressing students in Shanghai. Freedom of religion and political speech are fundamental, he said, and not limited to any particular country or culture.

On Tibet, Obama said that while Tibet is part of China, the U.S. “supports the early resumption on dialogue between the Chinese government and representatives of the Dalai Lama to resolve any concerns and differences.”

Obama travels this evening to Seoul, the last stop on his eight-day Asia trip.