China, U.S. seek to boost confidence as Biden visits

China and the United States share a responsibility for boosting global market confidence and the American economy remains fundamentally sound, the Chinese Vice President Xi Jinping told U.S. Vice President Joe Biden who is on a trust-building visit.Vice President Xi (pronounced “Shee”), expected to succeed Hu Jintao as president from early 2013, will inherit responsibility for his nation’s far-reaching and sometimes troublesome relationship with the United States.

Xi made clear that economic concerns are dominating the relationship for now. But he also expressed confidence in American economic prospects and did not voice concern about U.S. debt, according to senior Obama administration officials who briefed reporters on condition of anonymity.

“Recently, turmoil in international financial markets has deepened and global economic growth faces severe challenges,” Xi told Biden, according to the Chinese Foreign Ministry‘s website (www.mfa.gov.cn).

“As the world’s two biggest economies, China and the United States have a responsibility to strengthen macro-economic policy coordination and together boost market confidence.”

Biden’s five-day visit to China is about reducing distrust, not striking deals, and he also focused on shoring up optimism about U.S. power and prospects for Sino-American relations.

“I would suggest that there is no more important relationship that we need to establish on the part of the United States than a close relationship with China,” Biden told Xi in the Great Hall of the People, a cavernous ceremonial chamber.

“I hope it doesn’t sound chauvinistic to other countries, but our mutual success will benefit the whole world,” Biden later told Wu Bangguo, the chairman of China’s legislature.

Beijing wants Biden to assure it that its vast holdings of dollar assets and U.S. Treasury debt remain safe, despite Standard & Poor’s downgrade this month of the sovereign credit rating of the United States, official media have indicated.

But U.S. officials suggested that Xi took a softer line.

“I don’t want to quote Vice President Xi directly, but I think it’s fair to say he expressed great confidence in the fundamentals of … the U.S. economy and prospects for the future,” a senior Obama administration official traveling with Biden told reporters.

Another senior administration official, asked whether the criticism in Chinese media about U.S. debt spilled over in Biden’s talks with Xi, said: “I can’t comment on what the Chinese media is going to say to the Chinese public, but we’ve had lots of discussions between officials and, again, there’s no expression of any concern.”

Both officials spoke on condition of anonymity.

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Biden will also be looking for signs of how Xi, 58, intends to handle relations, which span currency and trade ties and tensions, U.S. arms sales to Taiwan, diplomatic disputes from Sudan to North Korea, and contention over human rights.

“It is my fond hope that our personal relationship will continue to grow as well,” Biden told Xi, the son of a revolutionary veteran.

Biden’s five-day visit allows China to test Washington‘s intentions on U.S. debt and new arms sales to Taiwan, the self-ruled island that Beijing calls a breakaway province.

Xi will boost his profile through meetings with Biden and a visit to the United States, possibly in early 2012. He will also have to show he can navigate minefields in relations.

Chinese media coverage of the U.S. debt debate and slow growth has exuded a sense that, after long lectures from Washington about the currency, trade gap, intellectual property piracy and human rights, Beijing holds the moral high ground.

Since the downgrade, state media have accused Washington of reckless policies that have created uncertainty about Beijing‘s holdings of dollar assets. Analysts estimate Beijing has put two-thirds of its $3.2 trillion in foreign exchange reserves, the world’s largest, in dollars and is the biggest foreign creditor to the United States.

“U.S. desperate for vote of confidence from China,” said the headline in the Global Times tabloid. But Biden wants to counter the view that U.S. power and confidence are waning.

“I also come with a strong message that the United States of America is and will continue to be engaged totally in the world,” Biden told Xi in the Great Hall.

Despite the downgrade, investors have poured funds into U.S. Treasuries as a safe haven amid turmoil in global equity markets and doubts about the strength of European growth.

After his meeting with Xi, Biden visited a restaurant offering a Beijing delicacy, pig liver stir fried with vinegar and soy sauce, but a White House official said he stuck to plainer fare: pork buns, noodles and cucumbers.

“The meetings were great. But it’s harder to order,” Biden told reporters in the humble-looking restaurant.

Despite the diplomatic backslapping, U.S. arms sales to Taiwan remain a volatile issue. It brought a sharp cooling of ties early last year, when Beijing curtailed military contacts to protest against an American arms package for Taiwan.

Washington is considering a new arms sale to the island, which could include Lockheed Martin F-16 C/D fighter jets. Sources have told Reuters that sale appears unlikely to go through, although no final decision has been reached.

Xi warned against riling China over Taiwan or Tibet.

“Taiwan and Tibet are issues concern China‘s core interests, and they concern the feelings of 1.3 billion Chinese people,” said Xi. “They must be carefully and appropriately handled to avoid interference in and damage to Sino-U.S. relations.”

BEIJING (Reuters) – By Jeff Mason and Chris Buckley(Writing and additional reporting by Chris Buckley; Editing by Brian Rhoads and Alex Richardson)