China nudges U.S. on assets ahead of Hu trip

By @ibtimes on

China would welcome assurances its financial assets in the United States are safe, a senior diplomat said on Wednesday, ahead of President Hu Jintao's visit next week, but played down rifts between the two powers.

Chinese Vice Foreign Minister Cui Tiankai said North Korea and other issues that need the two global giants to work together would also come up during Hu's January 18-21 trip. Hu will hold talks with President Barack Obama on January 19.

While Obama is certain to press Hu on currency controls, which many in Washington say keeps the yuan unfairly cheap and contributes to the U.S. trade deficit, Cui said Beijing had its own concerns about safety its big holdings of U.S. treasury debt.

China has amassed the world's biggest stockpile of foreign exchange reserves at $2.85 trillion, an estimated two-thirds of which is invested in the United States.

Regarding the security of China's assets in the United States, if the U.S. side can offer a positive statement on that then of course we'd welcome that, and it's an issue we're paying attention to, Cui told reporters.

Underscoring China's sensitivity to the issue, an academic adviser to its central bank, Xia Bin, told Reuters that global financial markets are better off with a balance between the dollar and euro, as opposed to having only dollar dominance.

China often seeks assurances on the security of its U.S. investments before any high-level meetings with Washington.

For two years, Chinese Premier Wen Jiabao has used his most important press conference of the year to say he is worried about the safety of China's U.S. investments.

The nudge was the closest Cui came to chiding the United States in a tone-setting briefing that stressed Beijing's hopes for a friction-free visit that will soothe the quarrels over trade, Taiwan, human rights and North Korea that unsettled relations during 2010.

He declined to answer directly questions about the yuan exchange rate, saying it was not his intention to upset markets.

Of course, the visit will also achieve broad and important outcomes in economic and trade cooperation, said Cui.

Hu's goal in his visit will be to shore up overall relations, not make breakthroughs, said Sun Zhe, a professor at Tsinghua University in Beijing who studies China-U.S. relations.

The U.S. always wants concrete outcomes from these visits. It will have quite specific expectations for this one. But China hopes that such visits can help achieve overall stability in relations, not necessarily specific outcomes, said Sun.

FOCUS ON ECONOMY, NORTH KOREA

The politically sensitive trade gap between the world's two biggest economies widened by 26 percent in 2010 to $181 billion in China's favor, Chinese data showed this week.

The growing gap provides fodder for critics of Beijing's tightly controlled currency regime who claim China keeps the yuan cheap to give its exporters an unfair advantage.

The briefing on Hu's trip, which touched on a series of sensitive economic and defense issues for the two countries, came as U.S. Defense Secretary of Defense Robert Gates was wrapping up a visit in China intended to defuse military tensions.

Cui said differences in national conditions and development levels meant China and the United States could not avoid differing views and friction.

This is normal, he said. If we had no dealings with each other, then there would also be no friction.

But Cui said China shares broad common interests and goals with the United States on Korean peninsula issues, and repeated calls to restart six-party nuclear talks.

On Tuesday, Gates said North Korea could have inter-continental ballistic missiles in five years, and the was becoming a direct threat to the United States.

Obama is likely to urge Hu to increase pressure on North Korea, which triggered regional alarm by shelling a South Korean island and by claiming progress in uranium enrichment, which could give it a second pathway to making nuclear weapons.

But Cui said there was room for agreement on North Korea.

China and the United States share broad interests and goals on issues about the (Korean) peninsula, he said.

Both countries believe we must protect the peace and stability of the peninsula.

China also conducted its first test flight of a stealth fighter jet on Tuesday, a move China said was not connected to Gates's visit.

No other country has reason to feel worried or troubled about this. What you've raised (about the stealth fighter) had nothing to do with Defense Secretary Gates's visit or with China-U.S. relations, he said.

(Reporting by Chris Buckley; Editing by Ken Wills and Jonathan Thatcher)

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