China's Xi Jinping, Obama exchange polite warnings

WASHINGTON -- President Obama took direct aim at China's trade policies as Chinese Vice President Xi Jinping warned U.S. business leaders Wednesday that the U.S. needs to respect Beijing's core interests and concerns.

During a visit with factory workers at Milwaukee's Master Lock, Obama said he won't stand by when competitors, such as China, "don't play by the rules."

"It's not fair when foreign manufacturers have a leg up on ours only because they're heavily subsidized," Obama said. "That's why I directed my administration to create a Trade Enforcement Unit with one job: investigating unfair trade practices in countries like China."

The president's comments came as Xi completed the second day of his high-profile U.S. tour. In their speeches, both Obama and Xi sent carefully crafted messages to their respective domestic audiences — and each other — as the complicated U.S.-Sino relationship reaches another milestone.

Xi, who is to take over as head of the Communist Party this fall and ascend to the presidency next spring, is the man who will lead China for the next decade. But as both sides feel each other out during what has been billed as a getting-to-know-you visit by Xi, they also are trying to show strength.

Concern about trip's timing

The visit comes just days after China and Russia blocked U.S.-supported condemnation of Syrian President Bashar al-Assad's regime and is also framed by the U.S. political season. Republican presidential contender Mitt Romney has repeatedly hammered Obama for being too soft on China. There was some concern by the Chinese before Xi's arrival over whether scheduling the trip during the American campaign season was a good idea, says Bonnie Glaser, an analyst at the Center for Strategic and International Studies.

In Washington, Xi told business leaders in a speech before the US-China Business Council that he wants to deepen the relationship between the two countries, but he warned that if the U.S. pushes too far it could damage the relationship. In unveiling its new defense strategy last month, Obama said that the United States would make a pivot toward the Pacific — a plan that has been received with some suspicion by the Chinese.

"China welcomes the United States playing a constructive role in promoting the peace, stability and prosperity of the Asia-Pacific region, and at the same time we hope the U.S. will truly respect the interests and concerns of countries in the region, including China," Xi said.

Obama and other top administration officials made the case to Xi directly a day earlier that China must do more to level the playing field for U.S. businesses competing against Chinese firms in the global marketplace. But Xi contended in his remarks on Wednesday that China has already made significant strides in balancing its trade policy.

The U.S. trade deficit with China hit a record $295.5 million in 2011, but Xi noted that China has become the fastest-growing export market for the USA. China's trade surplus-to-GDP ratio dropped from over 7% to 2% in 2011 as the yuan appreciated, moving into a reasonable range by international standards, Xi said. He also suggested that if the U.S. lifted restrictions on the sale of some high-tech goods, it could further help balance trade.