Obama praises China for helping ease financial turmoil, wrangles privately over currency issue

Obama pursues currency spat in meeting with China

UNITED NATIONS — President Barack Obama said Thursday that U.S. cooperation with China has helped ease global financial turmoil, but behind closed doors he and Premier Wen Jiabao continued wrangling over American charges that China’s currency is undervalued.

A U.S. official who was present called talks between the two “positive” and “genuine” but acknowledged that the currency dispute was the dominant issue.

U.S. exporters contend China’s yuan is kept artificially low, giving Chinese companies an unfair advantage.

In a speech Wednesday, Wen denied that — and warned against letting the issue be politicized.

“There was a lengthy discussion of the impact and the politics of the issue,” said Jeffrey Bader, an Asia expert on Obama’s National Security Council.

Bader said Wen reiterated China’s intent to gradually allow the yuan to rise. But Obama has publicly said that’s not happening fast enough.

The meeting with the Chinese leader came on the sidelines of the U.N. General Assembly meeting in New York.

During a brief photo session, Obama praised Chinese leaders for working with the United States on economic, nuclear nonproliferation and Asian security issues.

But, Obama said, “obviously, we continue to have more work to do on the economic front.”

“It is going to be very important for us to have frank discussions and continue to do more work cooperatively in order to achieve the kind of balance of sustained economic growth that is so important,” he said.

Despite intertwined economies and a growing dependence on each other in global diplomatic, environmental and security matters, Washington and Beijing have deep differences, especially on economic and trade policies. Trade friction has become even more pronounced ahead of U.S. congressional elections in November and at a time of high American unemployment.

In their public comments, Obama and Wen focused on the positive.

“Our common interests far outweigh our differences,” Wen said through an interpreter.

US-China cooperation, Obama said, is “a critical ingredient in a whole range of security issues around the world.”

In his Wednesday speech, Wen saw no link between the yuan’s value and China’s trade advantage over the United States. The politically sensitive U.S. trade deficit with China jumped to $26.2 billion in June, the largest one-month gap since October 2008.

Many Chinese companies, he said, would go bankrupt and workers would suffer if the Chinese currency rose drastically.

The Obama administration must balance pressure on Beijing’s economic policies with its desire for Chinese help in settling nuclear standoffs with North Korea and Iran and on other global initiatives. China is a veto-wielding member of the U.N. Security Council and recently passed Japan as the world’s second-biggest economy.

Currency is not the only point of tension between the countries.

China is lashing out at the United States for what Beijing says is interference in its territorial disputes in the South China Sea. China is also angry over U.S. arms sales to Beijing rival Taiwan and Obama’s meeting earlier this year with the Dalai Lama, the exiled Tibetan Buddhist leader China calls a separatist.

Also Thursday, the United States urged China and Japan, the top U.S. ally in Asia, to aggressively and quickly resolve a territorial dispute that has deepened animosity between the longtime rivals.

State Department spokesman P.J. Crowley told reporters that Secretary of State Hillary Clinton told new Japanese Foreign Minister Seiji Maehara that good ties between China and Japan are crucial to Asia’s prosperity.

Crowley said the United States isn’t mediating between the countries following Japan’s arrest of the Chinese captain of a fishing boat that collided two weeks ago with Japanese coast guard vessels near islands in the East China Sea claimed by both nations.

“Neither side wants to see the situation escalate to the point where it has long-term regional impact,” Crowley said.

Associated Press writer Mark S. Smith contributed to this report.