Obama says Washington not trying to contain China

SHANGHAI (Reuters) – U.S. President Barack Obama said he was not seeking to contain China's rise and called for more balanced trade between the two powers, which have sparred over currency and economic policy ahead of a summit.

Obama also used a town hall-style meeting in Shanghai on Monday to champion Internet freedom and human rights on the first full day of his first trip to China, but he did not mention Tibet or other sensitive issues that could have stoked ire ahead of his talks with senior officials in Beijing.

The U.S. president struck a genial note after days of swipes between the two sides over trade imbalances and China's yuan currency, which many in Washington say is so under-valued that it is warping the global economy.

"We do not seek to contain China's rise," he said before taking questions. "On the contrary, we welcome China as a strong and prosperous and successful member of the community of nations."

While billed as an opportunity for Obama to reach out to the Chinese public, the meeting bore the markings of a scripted but friendly encounter. Students dressed in suits smiled and applauded politely, and laughed when he tried Chinese.

Obama used the occasion to call for human rights and greater transparency on the Internet, which is heavily censored in China.

"These freedoms of expression and worship, of access to information and political participation, we believe are universal rights, they should be available to all people including ethnic and religious minorities," Obama told the audience.

"I'm a big supporter of not restricting Internet use," he said. "The more open we are, the more we can communicate and it also draws the world together."

His comments about the Internet were reported on the official Xinhua news agency's Chinese-language translation of the meeting.

DIFFICULT DISCUSSIONS AHEAD

Obama's day in Shanghai was a warm-up for his summit with President Hu Jintao in the capital on Tuesday, when the contention over trade, currency and economic policies will jostle for attention along with North Korea, Iran and climate change.

Obama has said he will also raise the sensitive subjects of human rights, and sometimes-tense trade ties and China's currency, seen by U.S. industry as significantly undervalued and stoking unsustainable global economic imbalances.

Obama noted that in 1979, when Washington established ties with the People's Republic of China, trade was worth several billion dollars, compared to more than $400 billion now.

"This trade could create even more jobs on both sides of the Pacific ... as demands become more balanced it can lead to even more prosperity," Obama said.

But at a gathering of Asia-Pacific leaders in Singapore over the weekend, Hu pointedly ignored international calls for his government to raise the value of the yuan and make Chinese exports relatively more expensive.

He and other senior Chinese officials have instead accused other countries -- implicitly including the United States -- of damaging trade protectionism aimed at Chinese goods.

A senior Chinese official on Monday made a fresh, thinly veiled criticism of Washington for running lax monetary and fiscal policies that risk undermining the dollar.

But having made their gripes clear before the summit, Obama and Hu may avoid sharp public jabs as they focus on building goodwill between the world's biggest and third biggest economies.

Obama said both the United States and China -- which together account for at least 40 percent of global greenhouse emissions -- must take "critical steps" to tackle global climate change, and other countries will be watching them in the run-up to next month's U.N. meeting in Copenhagen, he said.

Beijing has said developing countries should not accept internationally binding ceilings on emissions while they focus on economic growth and escaping poverty.

China has had a huge trade surplus with the United States, and is also the largest foreign holder of U.S. government bonds.

The U.S. trade deficit with China widened 9.2 percent in September to $22.1 billion, the highest since November 2008, according to U.S. data released last week.

But neither markets nor officials appear to expect any rapid shift in China's settings for the yuan.

China's Commerce Ministry on Monday rebuffed calls for the yuan to appreciate, signalling resistance to pressure for change.

"Either from the perspective of promoting stable global economic development, or from the perspective of promoting a recovery in Chinese exports, we must provide a stable and predictable environment for our enterprises, including macro-economic policy and currency policy," said Yao Jian, a ministry spokesman.

(Additional reporting by Jason Subler and Langi Jiang; Writing by Chris Buckley and Dean Yates; Editing by Ken Wills and John Chalmers)