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Obama: U.S.-China Ties Shape 21st Century

Updated 11:30 a.m. ET

President Obama, opening two days of high-level talks with China, said he believed that the discussions could lay the groundwork for a new era of "sustained cooperation, not confrontation" in a relationship likely to shape the history of the 21st century.

Mr. Obama said that Washington and Beijing need to forge closer ties to address a host of challenges from lifting the global economy out of a deep recession to nuclear proliferation and global climate change.

Vice Premier Wang Qishan, China's top economic policymaker, said his country's attempts to create a more open economy would help U.S. recovery efforts.

"With the furthering of China's reform and opening up, China and the United States will have even closer economic cooperation and trade relations and (the) China-U.S. relationship will surely keep moving forward," Wang said, speaking through an interpreter.

The discussions in Washington represent the continuation of a dialogue begun by the Bush administration, which focused on economic tensions between the two nations. Mr. Obama chose to expand the talks to include foreign policy issues as well as economic disputes.

Top officials from both countries have called the relationship crucial to solving many of the world's crises. The Obama administration hopes the talks can set the groundwork for cooperation on climate change, lifting the world economy out of turmoil and addressing nuclear standoffs with North Korea and Iran.

Mr. Obama said he was under "no illusions that the United States and China will agree on every issue," but he said closer cooperation in important areas was critical for the world.

"I believe that we are poised to make steady progress on some of the most important issues of our times," Mr. Obama told diplomats from both countries assembled in the vast hall of the Ronald Reagan Building.

"The relationship between the United States and China will shape the 21st century, which makes it as important as any bilateral relationship in the world," Mr. Obama said. (Read all of Mr. Obama's remarks.)

Secretary of State Hillary Rodham Clinton, welcoming the Chinese, said the two nations were "laying brick by brick the foundation for a stronger relationship."

Clinton also said the United States and China must work together to stop North Korean "provocations" and the spread of nuclear weapons and technology. She said both countries "appreciate the dangers of escalating tensions" and a possible arms race in East Asia. (More on Clinton's remarks.)

Treasury Secretary Timothy Geithner and Wang both spoke of hopeful signs that the global economy was beginning to emerge from its worst financial crisis since the Great Depression.

Geithner said that the so far successful efforts of the two economic superpowers to move quickly to deal with the downturns with massive stimulus programs marked a historic turning point in the relationship of the two nations.

Wang said that "at present the world economy is at a critical moment of moving out of crisis and toward recovery."

Chinese State Councilor Dai Bingguo said the countries cannot solve the world's problems alone.

"We are actually all in the same big boat that has been hit by fierce wind and huge waves," Dai said of the global economic and other crises. China and the United States, he said, must "try to cross the stormy water together as passengers of this boat."

Dai, speaking through an interpreter, noted that the countries are trying to build better relations despite their very different social systems, cultures and histories.

"Can we manage to do that? My answer is, we must work hard to make it happen, and, yes, we can - that is borrowed from President Obama." He added in English: "Yes, we can!"

Obama said that the United States and China have a shared interest in clean and secure energy sources.

As the world's largest energy consumers, Obama said that neither country profits from a dependence on foreign oil. He also said neither country will be able to combat climate change unless they work together.

However, the discussions this week were not expected to bridge wide differences between the two nations on climate change, and officials cautioned against expecting any major breakthroughs in other areas either. U.S. officials said they hoped the talks would set a positive framework for future talks.

With the global economy trying to emerge from a deep recession, the United States and China have enormous stakes in resolving tensions in such areas as America's huge trade deficit with China and the Chinese government's unease over America's soaring budget deficits.

Three years ago, then-Treasury Secretary Henry Paulson used the initial U.S.-China talks to press Beijing to let its currency, the yuan, rise in value against the dollar to make it cheaper for Chinese to buy U.S. goods. U.S. manufacturers blame an undervalued yuan for record U.S. trade deficits with China - and, in part, for a decline in U.S. jobs.

The U.S. efforts have yielded mixed results. The yuan, after rising in value about 22 percent since 2005, has scarcely budged in the past year. Beijing had begun to fear that a stronger yuan could threaten its exports. Chinese exports already were under pressure from the global recession.

"Clinton and Geithner are in the unenviable position of trying to patch over differences between the U.S. and China at a time when China's currency, the yuan, is being used more in international trade," says CBS News foreign affairs analyst Pamela Falk.

Falk, who attended meetings with U.S. and international economists in Beijing last week, predicts the talks are likely to achieve some success on the issue of the yuan's appreciation, "which will decrease the chances of a conflict with the U.S. Congress over the trade deficit."

But the Obama administration intends to remain focused on the trade gap, telling Beijing that it can't rely on U.S. consumers to pull the global economy out of recession this time. In part, that's because U.S. household savings rates are rising, shrinking consumer spending in this country.

For the United States, suffering from a 9.5 percent unemployment rate, the ultimate goal is to help put more Americans to work.

While the U.S. trade deficit with China has narrowed slightly this year, it is still the largest imbalance with any country. Critics in Congress say unless China does much more in the currency area, they will seek to pass legislation to impose economic sanctions on China, a move that could spark a trade war between the two nations.

For their part, Chinese officials are making clear they want further explanations of what the administration plans to do about the soaring U.S. budget deficits. China, the largest foreign holder of U.S. Treasury debt - $801.5 billion - wants to know that those holdings are safe and won't be jeopardized in case of future inflation.

Geithner said in his opening remarks that the United States was moving to repair its financial system and overhaul how financial companies are regulated. He said the administration was also determined to deal with a budget deficit projected to hit $1.84 trillion this year, more than four times the previous high.

"We are committed to taking the necessary steps to bringing our fiscal deficits down to a more sustainable level," he said.