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China holds fire over Obama before regional summit

China's Assistant Foreign Minister Liu speaks to members of his delegation during a senior officials' meeting of ASEAN countries and China i
China's Assistant Foreign Minister Liu speaks to members of his delegation during a senior officials' meeting of ASEAN countries and China i

By Chris Buckley

BEIJING (Reuters) - China appeared keen on Tuesday to avoid a brawl with the United States over trade and currency stances, brushing aside President Barack Obama's criticisms and stressing that the world's two biggest economies share a stake in stable ties.

Assistant Chinese Foreign Minister Liu Zhenmin did not directly address Obama's comment on Sunday that Washington was fed up with China's trade and currency practices.

"The meaning of President Obama's comments is a question that you should ask the White House and the State Department spokespeople," Liu told a news briefing.

"China and the United States are also economic partners each of which is important to the other," Liu told a briefing about Premier Wen Jiabao's attendance at regional ASEAN and East Asia summits on the Indonesian island of Bali later this week.

The East Asia Summit will be the first attended by a U.S. president. Obama will meet Wen during the meetings, said Liu.

"I think that along with the development of economic globalization, and the development of Asia-Pacific regional cooperation, China and the United States have massive potential to further strengthen economic and trade cooperation."

Tension had been building in the lead-up to the annual Asia-Pacific Economic Cooperation (APEC) forum gathering over a proposed U.S.-led free trade deal that Washington wants as a counterbalance to Chinese influence but which China sees as an attempt to force it to play by U.S. rules.

A day after talks with Chinese President Hu Jintao during the APEC summit on Hawaii, Obama used some of his toughest language yet against Beijing. He urged it to take on the responsibilities of a "grown up" economy and stop "gaming the system.

China's government will not welcome such remarks, but its leaders have shown throughout this year that they want to keep relations with the United States steady, and avoid feuding that could distract them from a handover of top posts among Communist Party leaders from late 2012.

Beijing held back from broader retaliation after Obama meet exiled Tibetan leader, the Dalai lama -- scorned by China as a foe of its rule in his homeland -- and after the White House announced new arms sales offers to Taiwan, the self-ruled island that China claims as its own.

"Some harsh words from President Obama won't come as a complete surprise because he's facing a grim economy at home, so Americans are in a bad mood," said Shi Yinhong, a professor of international security at Renmin University in Beijing.

The U.S. election could intensify trade tensions, he added.

"But China generally sticks to a pattern of avoiding open quarrels with the President ... China wants to ensure that stability remains in place."

SERIES OF DISPUTES

The currency dispute between China and the United States has been at the heart of tension between the rivals.

Washington has long accused Beijing of keeping the yuan artificially weak to give its exporters an advantage. China counters that the currency should rise only gradually to avoid harming the economy and driving up unemployment, which would in turn hurt global growth.

Liu suggested that the two governments should keep an amicable face on relations at the impending regional summit.

"China and the United States both have a major impact on the Asia-Pacific region," Liu said. "For the two countries to carry out cooperation and mutually benefit in Asia suits not only their interests, but also helps regional peace and development."

Last year, U.S.-China relations were beset by a series of disputes, including disagreements over China's trade and currency practices, U.S. arms sales to Taiwan, China's military build-up in the Pacific and its human rights record.

The East Asia Summit gathers senior officials or leaders from Southeast Asia, China, Japan, India, Australia, Russia, South Korea and New Zealand.

(Editing by Ken Wills and Jonathan Thatcher)

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