Obama, China's Hu press for strong words on Iran

[April 20, 2010]  WASHINGTON (AP) -- Amid a sudden upswing in relations, President Barack Obama and Chinese President Hu Jintao sought common ground Monday on Iran, agreeing that a set of potential sanctions should make clear to Iran the cost of continued nuclear defiance, a White House official said.

The two leaders, meeting on the sidelines of a U.S.-hosted summit on nuclear proliferation, also discussed a currency dispute between the two nations but without announcing specific progress toward resolving it.

White House national security aide Jeff Bader said Iran was a major topic at the 90-minute session between Obama and his Chinese counterpart. "I'd just say that the president in the meeting made clear the sense of urgency, and the Chinese made clear that they are prepared to work with us," Bader said. He called it another sign of international unity on Iran.

The upbeat assessment reflected a recent warming of U.S.-Chinese diplomatic ties, but the meeting produced no breakthroughs. Chinese spokesman Ma Zhaoxu did not mention sanctions in a statement on Hu's meeting with Obama.

Ma said China hopes all parties will step up diplomatic efforts and seek ways to resolve the Iranian nuclear issue through negotiations.

"China and the United States share the same overall goal on the Iranian nuclear issue," the Chinese statement said.

The U.S. description of the meeting echoed recent comments from Secretary of State Hillary Rodham Clinton, U.N. Ambassador Susan Rice and others that the Chinese are now willing to talk turkey on sanctions -- although nothing about a specific commitment. They started working on language at the U.N. last week.

Bader said Hu and Obama instructed their aides to work with the group of nations directly overseeing the Iranian nuclear issue and with U.N. officials to come up with a sanctions resolution. "The resolution will make clear the costs of pursuing a nuclear program that violates Iran's obligations and responsibilities," he said.

China -- as do the United States, Russia, Britain and France -- holds veto power on the U.N. Security Council. So it could block any sanctions proposal it does not like. In the past, both China and Russia have expressed reservations with some of the proposals issued by the United States.

On the currency dispute, Bader said Obama reiterated his view that there needs to be "a more market-oriented exchange rate."

U.S. manufacturers claim China keeps its currency pegged to the dollar to make its exports cheaper. And Obama has publicly called on China to let its currency rise.

Analysts suggest China doesn't want to be seen as bowing to U.S. pressure. Still, there have been recent signs that China is moving on its own toward allowing its currency to rise with market conditions.

The White House official called it a "positive and constructive" meeting, "a meeting without talking points" involving leaders who are "familiar and comfortable with each other."

He said the two leaders did break for a moment of silence to remember the deaths of 29 U.S. miners in the worst U.S. coal mining disaster since 1970.

The meeting came during a recent thaw in diplomatic exchanges between the two countries after a period of rising tensions aggravated by China's rigid currency policies, U.S. arms sales to Taiwan, Obama's meeting with the Dalai Lama at the White House and U.S. tariffs on Chinese tires.

Poised to soon surpass Japan as the world's second-biggest economy, China has softened its recent muscular rhetoric, muting criticisms of the U.S. as both nations seek to recovery from economic troubles.

In a step further reflecting the recent thaw in relations, Treasury Secretary Timothy Geithner postponed until this summer a report that had been due this week that might have condemned China for manipulating its currency, as Geithner had asserted in the past.

That could have proved an embarrassment to China, with its president in Washington attending Obama's summit.

Geithner also made an unscheduled visit to China last week -- following a trip to India -- and met with Chinese Vice Premier Wang Qishan.

That led to an increase in speculation that China may be getting closer to allowing its currency, the yuan, also called the renminbi, to appreciate with market forces. A stronger yuan would cut import prices inside China.

There are mixed views within China on the value of keeping the currency tied to the dollar. A stronger yuan, for instance, would give China's central bank a freer hand to raise interest rates to combat inflation.

A move to let the yuan rise in value against the dollar would benefit U.S. exporters. The undervalued Chinese currency has made Chinese goods cheaper for American consumers. But it's hurt U.S. companies by making their products costlier in China.

Fred Bergsten of the Peterson Institute for International Economics says the yuan is 25 percent to 40 percent undervalued against the dollar. If the Chinese currency were to appreciate by that amount, he estimates, it could generate 600,000 to 1.2 million U.S. jobs.

Charles Freeman, former assistant U.S. trade representative for China affairs and now with the Center for Strategic and International Studies, said there's "definitely been a public warming in relations" between the U.S. and China in recent weeks. "And I think the private relationship is slightly warmer," he said.

Freeman said he expects the Chinese will soon act to let its currency rise. "It's been in the works for a long time," he said.

As to future relations between the two economic super powers, "we're always going to have a bit of a roller coaster," Freeman said.

[Associated Press; By MARK S. SMITH and TOM RAUM]

Associated Press writer Foster Klug contributed to this report.

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