Cyber disputes loom large as Obama meets China's Xi

By Steve Holland, Matt Spetalnick and John Ruwitch

RANCHO MIRAGE, California (Reuters) - President Barack Obama told Chinese President Xi Jinping on Friday that the United States welcomes China's "peaceful rise" and seeks a world order where all countries play by the same rules on thorny issues like cybersecurity.

At the start of a two-day summit at a luxurious desert estate in southern California, Obama said the world's two biggest economies must strike a balance between competition and cooperation to overcome the challenges that divide them.

But tensions over cybersecurity could test the two leaders' ability to get along in meetings billed as an informal get-to-know-you encounter at the sprawling Sunnylands compound near Palm Springs.

In their talks, Obama plans to complain to Xi about suspected Chinese hacking of U.S. secrets, even as the White House faces growing questions at home over American government surveillance.

"The United States welcomes the continuous peaceful rise of China as a world power," Obama said as the two leaders delivered statements before sitting down for closed-door meetings.

But honing in on the top U.S. concerns, Obama said Washington seeks "an international economic order where nations are playing by the same rules, where trade is free and fair and where the United States and China work together to address issues like cybersecurity and protection of intellectual property."

Xi, meeting Obama for the first time since assuming the presidency in March, expressed the hope that China and the United States could build a new model of "big country" relations - alluding to his desire that Beijing be treated more in line with its growing international clout.

"Relations between our two countries are at a new historical starting point," Xi said, describing the talks as a chance to "chart the future" of U.S.-China relations.

Obama welcomed Xi in withering heat at the Sunnylands retreat, and the smiling leaders posed for a handshake photo against a backdrop of manicured gardens and barren desert mountains in the distance. Both wore suits without neckties.

High-level U.S.-Chinese encounters of recent decades have been unable to match President Richard Nixon's groundbreaking visit to Communist China in 1972 that ended decades of estrangement between Washington and Beijing.

U.S. officials believe Obama and Xi will develop personal rapport - something lacking between American presidents and Xi's notoriously stiff predecessor, Hu Jintao - that could help ease tensions in one of the world's most important bilateral relationships.

A willingness to forgo the traditional pomp and scripted discussions of a White House visit appears to signal a fresh approach by Xi, who as president-in-waiting met Obama in Washington in February 2012. He is a Communist Party "princeling," the son of a revolutionary leader. But he is also fond of Hollywood movie war dramas.

OBAMA SEEKS ASSURANCES

Obama wants Xi's assurance that he takes seriously accusations of growing Chinese cyber spying, including snooping on advanced U.S. weapons designs, and will act to curb the problem.

But Xi, who made no mention of cybersecurity in their brief appearance before reporters, may not be in a conciliatory mood.

He is expected to voice discomfort over Washington's strategic "pivot" toward Asia, a military rebalancing of U.S. forces toward the Pacific that Beijing sees as an effort to hamper its economic and political expansion.

And Obama's protests about Chinese cyberspying might be blunted by news that the U.S. government has been quietly collecting the telephone records of millions of Americans as part of U.S. counter-terrorism efforts.

More questions were raised about the extent of U.S. government domestic spying when the Washington Post reported that the National Security Agency and the FBI are also tapping into the central servers of leading American Internet companies to examine emails and photos.

Obama, visiting California's Silicon Valley earlier on Friday, staunchly defended the surveillance, calling it a "modest encroachment" on privacy that was necessary to protect the United States from terrorist attack.

Beijing insists it is more a victim than a perpetrator of cyber espionage. China's top internet security official said this week that he has "mountains of data" pointing to U.S. hacking aimed at China.

But the U.S. Congress is losing patience, particularly after a report that Chinese hackers had gained access to design plans for U.S. weapons systems like the F-35 Joint Strike Fighter. China denied that, saying it needed no outside help for its military development.

The two leaders may try to deflect pressure at the summit for immediate progress on cyber disputes by promising more in-depth deliberations by a U.S.-China "working group" already set to convene in July for the first time.

Speaking to reporters inside while the two leaders sat across from each other, Obama spoke in a cordial tone but wasted little time before ticking off some of their chief differences, including North Korea, China's human rights and climate change.

In keeping with the new tone of informality, the Chinese officials were all dressed in the same ensemble: dark suit, white dress shirt with the top button unbuttoned, no ties.

Obama aides played down the chances of any big breakthroughs in more than five hours of talks with Xi over two days in Sunnylands, a 200-acre (81-hectare) desert estate that has hosted presidents such as Ronald Reagan and Bill Clinton.

However, Obama will be looking to build on growing Chinese impatience with North Korea over its nuclear and missile programs, a shift that could bring Beijing - the closest thing Pyongyang has to an ally - closer to Washington's position.

(Editing by Alistair Bell and Paul Simao)

Source: http://news.yahoo.com/cyber-disputes-loom-large-obama-meets-chinas-xi-020327713.html

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