By Caren Bohan and Chris Buckley
WASHINGTON (Reuters) - Chinese President Hu Jintao arrived in the United States on Tuesday for a four-day state visit punctuated in advance by threats from U.S. senators to punish Beijing over its currency policies.
The White House weighed in on the dispute over the level of the yuan hours before Hu was due to arrive, urging China to take more steps to allow its currency to strengthen.
"We believe that more must be done. That is an opinion that is held not just by this country but by many countries around the world," White House spokesman Robert Gibbs said.
Hu said earlier this week he would not accept U.S. arguments that the yuan was undervalued -- an opening volley in a disagreement that is expected to dominate this week's trip.
Analysts are calling the visit the most important by a Chinese leader since Deng Xiaoping helped open bilateral ties 30 years ago, given China's growing military and diplomatic influence and its emergence as the world's second-largest economy after the United States.
Tensions over trade will feature prominently in Wednesday's summit between Hu and President Barack Obama. A host of other thorny issues, from rebalancing the global economy to dealing with North Korea, will round out the agenda.
Energy is also on the list and both countries sought to use that issue as a positive kickstart to the week, including cooperation in the clean energy field.
Among the deals announced, General Electric Co agreed with China Huadian Corp to supply about 50 gas turbines, which will generate some $500 million in revenue over the next five years.
The U.S. Energy Department said Alcoa Inc and China Power Investment Corp signed an agreement to collaborate on a range of aluminium and clean energy projects representing $7.5 billion in potential investment within China and abroad.
More deals are expected on the Chicago leg of Hu's trip.
CURRENCY ON Centre STAGE
The summit has galvanized Chinese human rights groups -- as well as the Tibetan, Taiwanese and Uighur communities and the banned Falun Gong sect -- that are airing grievances against Hu's government and urging Obama to speak out on human rights.
Pressed on how forceful Obama would be with Hu, Gibbs said: "I think the president will be firm ... in outlining the important beliefs of this administration and this country."
But currency concerns took centre stage in Washington.
Senators Sherrod Brown, a Democrat, and Olympia Snowe, a Republican, sent a letter to Treasury Secretary Timothy Geithner promising to introduce legislation to "address China's unlawful practice of currency manipulation."
"China's actions to subsidize its exports through currency manipulation pose both immediate and long-term challenges to American manufacturers and workers still recovering from the economic recession," they wrote.
Their letter came after a group of senators said on Monday the United States had to pass legislation to punish China if it fails to allow its currency to rise in value.
The Congressional Steel Caucus of lawmakers from steel-making states urged Obama to tell Hu that "American patience for its unfair and illegal trade practices, and its exploitative and anti-competitive policies, has run out."
"There's increasing frustration, particularly on the exchange rate issue, with the pace at which the Chinese have advanced," Steven Dunaway, an international economics expert at the Council on Foreign Relations, told reporters.
"Things could play out between the U.S. and China very similarly to what happened with Japan back in the 1980s and 1990s."
Chinese Foreign Ministry spokesman Hong Lei said Beijing hoped U.S. lawmakers would not sour the tone ahead of Hu's arrival, repeating that China was committed to reforming its exchange rate system.
"A great many factors have proven that the renminbi's (yuan's) exchange rate policy is not the main cause of the China-U.S. trade imbalance," Hong said. "We hope relevant U.S. lawmakers ... avoid harming the overall interests of China-U.S. economic and trade cooperation."
CHINA'S RISE PROMPTS FEARS
Investors and financial markets will watch for signs that Hu and Obama can ease tensions after a rocky 2010 but many analysts have cautioned not to expect too much beyond friendly words and business deals.
Tensions over currency were a big factor in relations last year. The yuan has risen nearly 3.5 percent against the dollar since Beijing ended its peg to the dollar in June, much less than demanded by critics in the United States.
Hu, in a written interview with The Washington Post and The Wall Street Journal, said China had taken steps towards a more flexible exchange rate policy.
China also says the United States should do more to rebalance the trade relationship.
Beijing's statistics showed a surplus in China's favour of $181 billion last year but, by Washington's reckoning, the U.S. deficit with China totalled $252 billion during the first 11 months of 2010.
China has tried to polish its image in the United States, running an advertisement on large billboards featuring basketball star Yao Ming at New York's Times Square.
Zheng Bijian, a Chinese government adviser, said he was concerned about U.S. fears about China's rise.
"If these doubts and assumptions become mainstream opinion, and even form part of national strategic judgments, then this will not only create grave misjudgements about China's direction of development, it will also seriously damage the United States' own interests and shared Sino-U.S. interests," he told a clean energy conference.
(Editing by John O'Callaghan)
