Clinton pushing China to level economic playing field in talks overshadowed by Korean tensions

By Matthew Lee, AP
Sunday, May 23, 2010

US pushing China to level economic playing field

BEIJING — The U.S. will push China to level the economic playing field between the two powers, U.S. Secretary of State Hillary Rodham Clinton said Sunday, previewing talks coming to be dominated by tensions between the Koreas.

Clinton and U.S. Treasury Secretary Timothy Geithner are leading the large American delegation at the two-day meetings, beginning Monday, with economic issues overshadowed by the sinking of a South Korean navy ship that’s been blamed on North Korea.

South Korea intends to take the matter to the U.N. Security Council and President Lee Myung-bak planned a nationwide address Monday to announce steps his government would take against the North, including “strong countermeasures” if there are more acts of provocation.

With tensions rising on that front, Clinton took her economic message to a Boeing maintenance facility at Shanghai’s Pudong Airport, addressing workers.

“For trade to work in any economy and for it to produce the benefits we know it can, there must be a level playing field where domestic and international companies can compete freely and openly,” she said.

Clinton said the U.S. side would press the Chinese for greater openness in regulations, nondiscrimination, fair access to markets and strong enforcement of intellectual property rights. President Barack Obama has pledged to double U.S. exports within five years and create 2 million jobs.

One issue likely to come up is the trade advantage Beijing has because of an undervalued Chinese currency.

As the European financial crisis deepens, Beijing appears to be pulling back from expected moves to loosen its currency’s peg to the U.S. dollar, saying the euro’s slide to four-year lows against the dollar is putting too heavy a burden on its own exporters.

China has kept the yuan at a rate of about 6.83 per dollar for nearly two years, seeking to cushion its exporters from the global financial crisis. Some economists reckon the yuan is undervalued by up to 40 percent against the dollar, giving Chinese exporters an unfair advantage in overseas markets.

While trying to make progress on economic issues, Clinton will seek Beijing’s support for punishing its ally North Korea.

She faces a hard sell convincing China’s leaders that they should back U.N. penalties after an international investigation blamed North Korea for sinking the South Korean ship.

An international team of civilian and military investigators said in a report Thursday that a North Korean submarine fired a homing torpedo on March 26, ripping South Korea’s 1,200-ton Cheonan in two. Fifty-eight sailors were rescued, but 46 died — South Korea’s worst military disaster since the 1950-53 Korean War.

The U.N. Command began an investigation Saturday into whether the attack violated the Korean War truce agreement.

North Korea threatened on Sunday to “crush” South Korea and said the report was an “enormous fabrication” only designed to justify the South’s attempt to invade the North in collaboration with the U.S. North Korea has routinely accused Washington and Seoul of plotting an invasion.

China, which is North Korea’s primary ally and financial supporter, has been neutral on the conclusions of the report.

Clinton has said the evidence was “overwhelming” that North Korea was behind the sinking and that the reclusive communist country must face international consequences.

Chinese officials have appealed for calm and called the sinking “unfortunate.” But they have stopped short of backing South Korea, instead reiterating long-standing views on the need to maintain peace on the peninsula. China is a veto-holding permanent member of the Security Council, so its backing for any action is critical.

Associated Press writer Hyung-jin Kim in Seoul contributed to this report.

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