WRAPUP 5-China and U.S. each claim gains on yuan in talks

* Geithner: confident China will see use of yuan reform

* China vice minister: U.S. “understands” China yuan policy

* Vague agreement to seek stability on Korean peninsula

* Geithner reassures China on deficit efforts

(Writes through)

By Glenn Somerville and Chris Buckley

BEIJING, May 25 (BestGrowthStock) – China will chart its own course
on currency reform, top officials from Beijing and Washington
said on Tuesday at the end of talks that both agreed had aired
plenty of disputes while leaving any answers for later.

The two-day Strategic and Economic Dialogue covered much of
the rough economic and foreign policy terrain that has sometimes
strained ties between the world’s biggest and third biggest
economies, including trade and technology barriers, North Korea
and Iran.

At the end, both Washington and Beijing claimed some victory
on the issue that has dogged economic relations throughout the
year: China’s policy of tethering its yuan currency to the
dollar, which the Obama administration says gives Chinese
products an unfair advantage.

The U.S. said Beijing was heeding those complaints. China
said Washington was heeding Beijing’s assertion that it would
steer currency reforms in its own way and own pace.

At the close of the talks, U.S. Treasury Secretary Timothy
Geithner said the discussions on the yuan were encouraging but
would not speculate when Beijing might let its yuan rise in
value as American lawmakers have demanded.

“This is of course China’s choice,” he said in the
statement.

Geithner said on Bloomberg Television that he was “as
confident as I’ve ever been” that China will see that it is in
its own interest to let the yuan resume appreciating.

Chinese Assistant Finance Minister Zhu Guangyao said the
U.S. “clearly understanding China’s stance” on the yuan.

“The United States also understands that China will
independently decide on the specific steps of its exchange rate
reforms, based on its own interests, taking into account world
economic conditions and China’s own development trends,” he
said.

The show of mutual goodwill may for now ward off a flare-up
in tensions over the yuan, which many in U.S. Congress say is a
big part of the reason for their country’s trade deficit with
China, which was $226.8 billion in 2009.

But the talks left unclear whether any possible currency
moves by China will be enough to satisfy critics in Congress.

China has held its currency at about 6.83 to the dollar
since mid-2008, trying to protect its exporters from the damage
of the global financial crisis. In the three years before then,
the yuan had risen about 21 percent against the dollar.

In April, Geithner delayed a report on whether China
manipulates its currency, a finding that would trigger increased
pressure on Beijing.

On Tuesday, he declined to tell reporters when his
department would issue its delayed report. “That time will
come,” he said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For full coverage of China-U.S. relations [ID:nN22220946]

Yuan special coverage: http://china.thomsonreuters.com/yuan/

The Yuan Debate Top News page:
http://link.reuters.com/jej52k

U.S.-China trade graphic: http://r.reuters.com/duq35k
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

IMPOSSIBLE TO AGREE ON ALL ISSUES

Tensions flared between Beijing and Washington in the first
months of 2010, when China denounced U.S. criticism of its
Internet censorship, Washington’s arms sales to Taiwan, and
Obama’s meeting with the Dalai Lama, Tibet’s exiled leader.

After that stormy start to the year neither side appeared
willing to risk worrying markets with renewed feuding, and the
talks swaddled the hard problems between them in soft words.

“It is impossible for the United States and China to agree
on all issues and the two sides will have disagreements and
differences,” leading Chinese diplomat, State Councillor Dai
Bingguo, said at the end of the meeting..

He and U.S Secretary of State Hillary Clinton said they
agreed on the importance of stability on the Korean Peninsula
after South Korea said North Korea was behind the torpedoing of
one of its warships in March, killing 46 sailors.

But China steered away from public comments that could
alienate North Korea, a poor and isolated state on China’s
northeast border.

Chinese Vice Foreign Minister Cui Tiankai urged calm and
told reporters that it was up to all sides to “proceed from the
wider context of protecting the peace and stability of northeast
Asia and the Korean Peninsula.”

Clinton said she had “productive” talks with China on
annexes to proposed sanctions on Iran that would detail the
people and firms to be targeted by under a proposed United
Nations Security Council resolution.

FISCAL DISCIPLINE

China is the world’s largest holder of U.S. Treasuries, with
$895.2 billion. Chinese officials, including Premier Wen Jiabao,
last year prodded the Obama administration to avoid pursuing
fiscal policies that could erode the value of those holdings.

This time, China was quieter about any worries.

Geithner told an audience of Chinese officials that the
Obama administration was aiming to steadily lower its deficit as
a percentage of national output.

“The basic strategy is to make sure that our economy is
growing, then institute long-term reforms, and restore the basic
discipline to the budget process that we abandoned in the
previous decade,” he said in a speech.

Stock Market Basics
(Additional reporting by Arshad Mohammed, Doug Palmer and Lucy
Hornby; Editing by Ken Wills, Ron Askew)

WRAPUP 5-China and U.S. each claim gains on yuan in talks