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Change tugs at US-China ties ahead of Hu visit

Chinese holdings of US debt fall
Washington (AFP) Jan 18, 2011 - Chinese holdings of US debt fell by $11.2 billion in November from the previous month, the US Treasury said, as the White House prepared for the arrival Tuesday of Chinese President Hu Jintao for bilateral talks. Beijing's holdings in US sovereign debt fell to $895.6 billion from $906.8 billion in October. The level was roughly the same as it was in December 2009, when China held $894.8 billion worth of Treasuries. Japan continued to add to its trove of US bonds, with $877.2 billion in November compared to $875.0 billion in October. Japan has added a total of $122.9 billion in Treasuries since November 2009.

Nobel laureate backs China's currency caution
Hong Kong (AFP) Jan 18, 2011 - Nobel economics laureate Robert Mundell on Tuesday backed Beijing's go-slow approach to hiking the value of its currency as China's president visits Washington -- its harshest critic on the issue. Beijing has pledged to increase the flexibility of the yuan's exchange rate to make it a global currency rivalling the dollar, but critics have charged that China still unfairly undervalues the yuan to boost its own exports. The thorny issue is sure to be high on the agenda when Hu Jintao meets President Barack Obama during his first official state visit to the United States this week, amid strained China-US relations.

Beijing has warned that a big upswing in the yuan's value would hammer the country's key export industries, sparking job losses for millions of workers and leading to social unrest. Mundell, a leading authority on currencies and viewed by some as the "father" of the euro, on Tuesday defended Beijing's caution despite growing calls to quickly dismantle the yuan's de facto peg to the dollar. "That's just a no-no for China. It would be devastating", the 1999 Nobel Prize winner in economics told a financial forum in Hong Kong. "I don't think (China) should change its exchange rate". If Beijing let the currency rise slowly -- between two and three percent a year -- the damage would be minimal, he added.

"It would not do any great harm at that rate," said Mundell, a professor at Columbia University in New York. Since Beijing's pledge last June to let the yuan trade more freely against the dollar, it has gained about 3.6 percent against the US currency. In the past month the pace of appreciation has accelerated, with the yuan gaining 1.1 percent as the United States pressed China for action. But US Treasury Secretary Timothy Geithner said Friday the real appreciation of the yuan was more than 10 percent a year due to inflation. In response to questions from the Wall Street Journal and Washington Post, Hu on Sunday described the world's dollar-led currency system as a "product of the past", and dismissed boosting the yuan's value as a solution to China's surging inflation rate.
by Staff Writers
Washington (AFP) Jan 18, 2011
China's President Hu Jintao has set out for the United States at a time of flux and stress in Sino-US ties, with America weakened by crisis and Beijing flexing a new range of powers.

Hu headed to the United States on Tuesday, the foreign ministry in Beijing said.

And while US President Barack Obama will lay on the pageantry of a state visit after Hu arrives later in the day, tensions on human rights, currency rates and North Korea, as well as military mistrust, are wobbling the key relationship.

Obama and Hu also both face domestic political puzzles that could stress ties between the world's top power and its fastest growing one.

America is scarred by a financial meltdown and its slow recovery. A power transfer is meanwhile looming in China, where economic and military expansion have uncorked new challenges for communist leaders.

Hu's state visit will likely be his last before a Chinese leadership transition is complete by 2013 and will have US officials seeking a glimpse into the next era of relations with Beijing.

"America and China have arrived at a critical juncture, a time when the choices we make, big and small, will shape the trajectory of this relationship," US Secretary of State Hillary Clinton said last week.

In the past, US presidents framed their efforts as peacefully managing China's emergence into the world economy and global diplomatic system.

But that once far-off day when China would take its place among the great powers has already arrived, making Obama's task more complex.

Obama's first move in China-US relations was to seek cooperation across a broad range of issues, from climate change to economic disputes, which sparked talk of a new G2 grouping of dominant powers.

But it quickly became clear after an awkward Obama visit to China in November 2009 that Beijing was either unready or unwilling to play the role America wanted.

Washington has complained that the exchange rate of China's yuan is hindering the US economic recovery while Beijing has bristled at the Dalai Lama's visit to Washington, criticisms of its human rights record and US arms sales to Taiwan. North Korea has also exposed diplomatic fault lines.

The two militaries have been at odds, while China took a robust stance on flaring territorial questions in the South China Sea as Washington sought to restore its diplomatic influence in Asia.

However, both sides now seem to be trying to cool the drama.

"I think that the US has made its point. I think the Chinese side recognizes that it overstepped somewhat this last year," said Michael Green, of the Center for Strategic and International Studies (CSIS).

"Both want out of this a more stable relationship for 2011, and arguably, 2012."

China has recently allowed the yuan to slowly rise, while top US officials have moderated currency criticisms, pointing out that Chinese inflation is helping US competitiveness.

They have also said that despite its emerging economic might, China still needs the US market for its exports and relies on US innovation.

And with US unemployment near 10 percent, the Obama team says a stable relationship with China is indispensable.

"This is a relationship that has huge economic benefits for Americans," Treasury Secretary Timothy Geithner said.

"Last year, our exports to China passed the 100 billion dollar mark ... China is likely to become our biggest trading partner sometime roughly 10 years from today," he added.

While Hu will seek to burnish his legacy this week, US officials are keeping an eye on China's domestic politics, amid new tensions wrought by the fast-growing economy and the military's growing geopolitical importance.

While Hu is the supreme Chinese leader, Obama and other top officials have to be at least conscious of other centers of power within China.

"President Hu and his team have been very straight interlocutors for the United States on behalf of their country," Obama's National Security Advisor Tom Donilon said.

"There are debates though, that you see in China, particularly in the blogosphere and in newspapers in China, about the Chinese approach to their rise and the Chinese approach to the United States.

"And following the debate is a very important thing to do."

Ahead of Hu's visit, China unveiled a 60-second promotional video on the huge screens in New York City's Times Square to coincide with his US visit this week -- a flashy bit of soft diplomacy.

The video -- which features basketball superstar Yao Ming, piano virtuoso Lang Lang and Chinese astronaut Yang Liwei -- aired for the first time late Monday.

Chinese state media reported Tuesday, citing unnamed sources, that a series of deals was expected to be signed during the visit, including the sale of Boeing aircraft to China, where the aviation sector is booming.

Another possible major deal in the works is one that would see China help the United States develop its high-speed rail network, the China Daily said.

Chinese and US businesses on Monday signed deals worth $600 million in the southern state of Texas, China's Xinhua news agency reported.

earlier related report
White House defends Hu state visit invite
Washington (AFP) Jan 18, 2011 - The White House Tuesday defended its decision to hold a state dinner for Chinese President Hu Jintao, insisting his lavish welcome would not mute US criticism of Beijing's human rights record.

Mindful of the symbolic weight of optics surrounding Hu's visit, officials have taken precautions to avoid any repeat of the time Hu was heckled by a rights activist when he visited George W. Bush's White House.

But White House spokesman Robert Gibbs said US officials would forcefully raise human rights in China, and the plight of President Barack Obama's imprisoned successor as Nobel peace laureate.

"President Obama put out a very forward-leaning statement upon the awarding of the Nobel Peace Prize to Liu Xiaobo -- that he should be free, that he certainly should be free to go Oslo and accept his prize," Gibbs said.

"We will continue to have difficult conversations, but necessary conversations that have to be had with China and we'll do that again tomorrow."

Gibbs was asked by reporters why Hu should be offered the pomp of a state dinner on Wednesday when the United States is such a harsh critic of his government's human rights record.

He did not answer directly, but argued that both India, the recipient of Obama's first state dinner, and China which will be honored Wednesday, are from a crucial and fast growing global region that needs US engagement.

"We want to build on the cooperative part of the relationship with China and -- and deal directly with some of those very difficult challenges," Gibbs said.

"In order to make progress on certain issues you've seen the two countries work together, despite, again, continuing to have differences on things like continued economic growth and human rights."

Obama's decision to honor Hu with a state dinner comes after Bush decided to offer the Chinese leader a formal luncheon rather than the full state visit treatment when he was at the White House in 2006.

After that visit, a Chinese-born US resident Wenyi Wang was charged with heckling the Chinese leader, and chanting slogans, in a protest which embarrassed US officials.

Ahead of this week's visit, authorities are taking no chances. Journalists intending to attend Hu's events were required to register well in advance to enter the White House events -- even those who possess a "hard pass" allowing entry into the grounds.

Though ties between China and the United States have been in rough shape in recent months, with disputes over economics, Tibet, US arms sales to Taiwan and human rights, the White House is going out of its way to be hospitable.

Obama will host Hu in a rare private dinner for a foreign leader on Tuesday night, two hours after Hu touches down at Andrews Air Force base.

The intimate event in the Old Family Dining Room of the White House residence will include Secretary of State Hillary Clinton, National Security Advisor Tom Donilon and two corresponding Chinese officials.

Hu will get a full arrival ceremony with military honors at the White House on Wednesday, Oval Office talks, a meeting with US CEOS and then the state dinner.

Elizabeth Economy of the Council on Foreign Relations said that the Chinese side had received the kind of treatment they saw as fitting for their global status.

"They have basically everything they have asked for in terms of providing viewers back in China with the sense that President Hu Jintao and China have arrived, and are sitting side by side with the US President on equal footing or standing," she said.

Human rights advocates promised to ensure that the plight of Liu and other oppressed peoples in China are heard.

"The administration needs to become a stronger voice for the voiceless and vulnerable in China," said Leonard Leo, chairman of the congressionally mandated US Commission on International Religious Freedom.

Chinese Human Rights Defenders, a network of Chinese and international activists called on the US president to take a firm public stand.

"During Chinese President Hu Jintao's visit to Washington this week, Obama must send a strong and clear public message that his administration is committed to standing up for the freedom of Chinese citizens," it said.

In Washington, free Tibet activists launched a three day "festival of protest" to denounce Hu.

Hu's "brutal and violent occupation of Tibet, and abuses committed against his own people, clearly show the truth that China remains an unchanged, repressive and authoritarian state," said Tenzin Dorjee, Executive Director of Students for a Free Tibet.

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Hu's US visit not expected to bridge deep divides
Beijing (AFP) Jan 16, 2011
After a tumultuous year that saw a shift in power between the world's two biggest economies, Chinese President Hu Jintao heads to Washington this week for a carefully orchestrated visit - but one that is not expected to bridge the deep divisions plaguing ties. Hu and US President Barack Obama will be at pains to put a positive spin on the complex relationship between their countries when th ... read more

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