Obama and Hu to confront economic strains

Washington (Reuters): President Barack Obama and his Chinese counterpart Hu Jintao confront stubborn rifts over North Korea and bilateral economic imbalances on Wednesday when they meet amid the pomp of a formal state visit.

Both presidents have vowed stronger cooperation between the world’s two largest economies in an effort to bridge the strains of the past year over human rights, Taiwan, Tibet and the gaping U.S. trade deficit with China.

Taking major strides toward narrowing these disagreements, however, will test the depth of their partnership. Some in Washington and Beijing are treating the summit as a test of how well the two powers can work in concert as China’s ambitions expand in line with its rapid economic growth. “We bear special responsibilities as the first and second biggest economies. We bear special responsibilities because of the threat to world stability posed by the nuclear programs in North Korea and Iran,” U.S. Secretary of State Hillary Clinton told Chinese television, according to a transcript issued by the State Department.

“So this is a critical juncture to determine how good the cooperative relationship between our two countries can be going forward.”

Hu has been reluctant to give ground to U.S. demands to intensify pressure on China’s ally, North Korea, to abandon its nuclear ambitions, after the North alarmed the region by shelling a South Korean island and claiming advances in uranium enrichment, which could give it a second means to make nuclear weapons.

Beijing has also bristled at U.S. demands for faster appreciation of the yuan currency, which would make Chinese goods relatively more expensive and possibly help lower China’s trade surplus with the United States, which Washington puts at $270 billion.

U.S. lawmakers are impatient for results and a meager outcome could increase congressional pressure on China over the trade deficit and to punish China for managing its currency.

“It is critical that Congress, and the rest of the world, sees results during the summit between Chinese President Hu Jintao and President Obama, particularly regarding North Korea and economic issues,” Rick Larsen, co-chair of the House of Representative’s bipartisan U.S.-China Working Group, said in an e-mailed statement.

A survey by the American Chamber of Commerce in Shanghai, published hours ahead of the summit in Washington, showed a growing number of U.S. companies say the enforcement of intellectual property rights has deteriorated in the last year and that the regulatory environment is the biggest hurdle to doing business there. [nTOE709049]