Obama meets China's Hu; focus on economic strains (thewest.com.au)

BEIJING (Reuters) - U.S. President Barack Obama held much-anticipated talks with his Chinese counterpart Hu Jintao on Tuesday, with trade friction, the yuan currency and diplomatic headaches such as Iran and North Korea high on the agenda.Obama is expected to prod Hu on the value of the yuan, following days of testy exchanges between U.S. and Chinese officials over a currency that Washington says stokes global economic imbalances because it is heavily undervalued.Chinese officials have shown little patience for the criticism, and they have instead accused Washington of trade protectionist impulses and lax fiscal policies."We believe strong dialogue is important not only for the U.S. and China but for the rest of the world," Obama told Hu at the start of their meeting in the Great Hall of the People, before reporters were ushered out.A few thousand Chinese had earlier gathered in Beijing's central Tiananmen Square on a bright cold day to watch Obama's motorcade pass. His convoy slowed as it drove past a giant portrait of Mao Zedong, founder of Communist China.Obama has stuck to a careful diplomatic line since arriving in China on Sunday night, underscoring Beijing's growing power and its importance as Washington's biggest foreign creditor."Bilateral relations are regarded as more equal than before," said a headline in the Global Times, a popular tabloid published by the People's Daily, the Communist Party's main newspaper.Chinese media have avoided fawning over Obama, in contrast to the effusive receptions he has received in Europe. Several websites deleted comments championing Internet freedom that he made at a town hall talk with students in Shanghai on Monday.Obama and Hu have a crowded agenda, underscoring the breadth and complexity of ties between their countries, respectively the world's biggest and third biggest economies.They will make statements to the media at 12.15 p.m. (4.15 a.m. British time) but will take no questions.Trade ties have surged since China opened up to the world and introduced market reforms in the late 1970s after decades of virtual isolation under Mao.But that has sparked tensions because of a huge surplus in China's favour. Chinese exports to the United States were $337.8 billion in 2008 compared to U.S. exports to China of $69.7 billion.GLOBAL PLAYERSBeyond the economic linkages, Washington and Beijing are key players in frustrated efforts to end North Korea's nuclear weapons programme, and Obama will be looking for more support from China to press Iran over its nuclear activities.Obama is also likely to raise human rights in China, as well as efforts to forge a new climate pact, following acknowledgement that a legally binding agreement will not emerge from negotiations in Copenhagen next month.Both governments have tried to strike a friendly tone before what could otherwise be a combative summit.In the commercial hub of Shanghai on Monday, Obama told Chinese students he did not fear their nation's rise, as he began his first visit to China since taking office earlier in the year, but called for more balanced trade between the two sides."This trade could create even more jobs on both sides of the Pacific while allowing our people to enjoy a better quality of life and as demand becomes more balanced, it can lead to even broader prosperity," he said.But in the summit talks on Tuesday, economic strains will loom large.At a gathering of Asia-Pacific leaders in Singapore over the weekend, Hu pointedly ignored international calls to help ease global imbalances by raising the value of the yuan, which would make Chinese exports relatively more expensive.He and other senior Chinese officials have instead accused other countries, implicitly including the United States, of embracing damaging trade protectionism aimed at Chinese goods.On Monday, China's Commerce Ministry rejected calls to raise the value of the yuan, which would make the country's exports relatively more expensive.Obama has cast his visit as an effort to win trust from a government and a public often wary of U.S. intentions towards the rising Asian superpower."I'm hopeful that in my meetings with President Hu ... both the United States and China can work together to try to reduce conflicts that are taking place," he said.(Additional reporting by Lucy Hornby; Writing by Ben Blanchard; Editing by Benjamin Kang Lim and Dean Yates)