By Glenn Somerville and Chris Buckley
WASHINGTON (Reuters) - U.S. officials on Monday toughly criticized China for a crackdown against dissidents but took a softer tone on the need for cooperation to boost global growth at the start of two days of talks.
"We have vigorous disagreement in the area of human rights," U.S. Vice President Joe Biden said as the Strategic and Economic Dialogue opened. He said the Obama administration will keep raising its concerns with Beijing.
The talks covering a range of economic and diplomatic issues are aimed at letting the world's two largest economies manage, if not resolve, their often tense policy differences. Both sides pledged to use the talks to that end.
Washington pressed familiar economic themes, saying Beijing should let its yuan currency rise faster and do more to spur domestic demand, but it also welcomed reforms China has taken and admitted the U.S. budget needed tightening.
Chinese Vice Premier Wang Qishan, speaking as a session on economic policy opened, said that while the global economy was slowly gaining strength "the situation is still complicated and fraught with uncertainties."
Japan's earthquake, excess liquidity in global money markets and Mideast unrest "have all seriously damaged market confidence," Wang said.
By this time next year, both countries are expected to be focussed on domestic politics as campaigning for a U.S. presidential election intensifies and the process of choosing a successor to Chinese President Hu Jintao gets under way.
That adds impetus to the current talks to try to find ways to manage areas of potential trouble before policymakers' attention is distracted by internal affairs.
STRONG-DOLLAR TALK
Top Chinese officials were careful not to turn the meeting into a public mud-slinging match, and kept their comments to the media muted.
Wang, co-chair of the economic talks with U.S. Treasury Secretary Timothy Geithner, cautioned that it takes time to correct economic imbalances -- such as China's bulging trade surpluses and corresponding deficits in the United States -- and implied that Washington had more to do than Beijing.
"The key to a global economic recovery still lies with the United States," Wang said. "We are pleased to note that the U.S. economy is gradually improving and the Chinese economy as a whole is in good shape."
China, the United States' biggest creditor, has a legitimate concern that its vast holdings of dollar-based assets could suffer as the U.S. dollar declines. But it turned aside chances to openly criticise the loose monetary and budgetary policies it has argued in the past were weakening the dollar.
"We've already become accustomed to fluctuations between exchange rates," China's central bank governor, Zhou Xiaochuan, told reporters. "At the same time, we've noted that the U.S. Treasury Department has repeatedly stressed the view that a strong dollar is in the interests of the United States and the world."
China pushed back on U.S. claims that its yuan, also called the renminbi, was undervalued and was giving it an unfair trade advantage. Commerce Minister Chen Deming said trade statistics proved his point.
"From the perspective of trade, the West's fears and worries about China's renminbi are unfounded because over the past three years China's trade surplus has continuously dropped," Chen told reporters.
The yuan has risen about 5 percent since being freed from a peg to the U.S. dollar last June, an amount U.S. producers consider far too little to erase what they see as an unfair advantage for Chinese producers in global markets.
A senior U.S. official said Treasury Secretary Timothy Geithner focussed more on getting China to open up to U.S. investment and to reduce barriers to imports, even as he restated long-standing concerns on the yuan.
Earlier, Geithner said steps to bring about better-balanced growth between the two nations "are not in conflict, and the strengths of our economies are still largely complementary."
He cited what he called "very promising changes in the overall direction of Chinese economic policy."
FEAR OF UNREST
Human rights has become an edgier issue in the past few months because Beijing has taken a much harsher line with dissidents, rights lawyers and journalists in China, apparently worried it could face the type of political unrest that erupted in the Middle Ease and North Africa.
Since February, China has detained dozens of dissidents, human rights advocates, and prominent grass-roots protesters.
U.S. Secretary of State Hillary Clinton publicly voiced displeasure with China's steps to squelch dissent, and a senior U.S. official said she had "very candid and very honest" private discussions on the matter with Chinese State Councilor Dai Bingguo.
China's leaders say U.S. complaints about its human rights record are illegitimate meddling and they have become increasingly unyielding in the face of Western pressure.
During an opening ceremony, Clinton said the measure of success for the talks would be specific progress on issues.
But with most of the discussions taking place behind closed doors, it was unclear what, if any, progress had been made after the first day.
Republicans in the U.S. House of Representatives, keen to keep the pressure on Beijing to allow for a faster appreciation of the yuan and open up its markets, wrote to Geithner and Clinton to argue China's policies were hurting Americans companies.
(Additional reporting by Paul Eckert, Andrew Quinn and Doug Palmer; Editing by Christopher Wilson)
