US warns on exports, China pledges reform at APEC

US President Barack Obama called for surplus economies such as China to end reliance on exports for growth, but his Chinese counterpart said economic policy change would come gradually.

Obama and Chinese President Hu Jintao spoke to Asia-Pacific business executives a day after a summit in Seoul of the Group of 20 major economies managed only vague commitments to keep a fragile global economic recovery on track.

They then joined other leaders of the Asia-Pacific Economic Cooperation (APEC) group for a weekend of talks on policies to ensure balanced growth and the establishment of a vast free trade area in the world's fastest growing economic region.

"One of the important lessons the economic crisis taught us is the limits of depending primarily on American consumers and Asian exports to drive economic growth," Obama said.

"Going forward, no nation should assume that their path to prosperity is simply paved with exports to America," he said on the final leg of a 10-day tour that has also taken him to India, Indonesia and South Korea.

The United States and China have been fussing over who is doing more damage to international trade. Washington contends the yuan is undervalued, giving it an export advantage, while Beijing argues the US Federal Reserve's easy-money policy is aimed at weakening the dollar to boost exports.

Hu, taking the podium shortly after Obama, told the business forum China wanted to expand domestic demand growth and remained committed to reforming its exchange rate "on the basis of retaining initiative, controllability and gradualness".

"China will continue making encouraging a balanced international balance of payments an important task in ensuring macro-economic stability," Hu said.

The G20 countries are trying to find ways of bringing down overly large current account surpluses and deficits among major economies to head off potentially destructive protectionism.

Hanging over the summit as well are acrimonious disputes between host Japan and both China and Russia over neighbouring islands.

Hu barely smiled when he shook hands with Japanese Prime Minister Naoto Kan as he welcomed APEC leaders to a lunch ahead of the start of their summit. Japan has sought a meeting between Kan and Hu, but the Chinese side has yet to agree.

Relations between Asia's two biggest economies have been soured by the dispute over isles in the East China Sea near potentially vast oil and gas reserves. Public anger has been fuelled by the recent leaking of a video that shows a Chinese fishing boat appearing to steer into Japanese patrol vessels.

Thousands of Japanese took to the streets on Saturday to protest what they see as an imperialistic China in Yokohama, a port city known for having Japan's biggest Chinatown, with anti-globalisation activists, helmeted left-wing students, and other nationalist groups also marching.

The shouts of one group of protesters could be heard inside the sprawling conference centre, demanding the return of islands claimed by Japan but held by Russia.

Tokyo's relations with Moscow chilled after Russian President Dmitry Medvedev visited an island claimed by both countries. Medvedev and Kan, however, will hold talks later in the day.

APEC is for the first time championing a collective growth strategy, emphasising balanced and sustainable growth, an elusive goal when the global economy is split between cash-rich exporters and debt-burdened importers.

The leaders will pledge to take steps to create a vast Free Trade Area of the Asia-Pacific (FTAAP) in the region, home to 40% of the world's population and 53% of global economic output, by building on existing pacts.

An Asia-Pacific free trade area would link the world's top economies with some of its fastest-growing ones such as Indonesia, Thailand and Mexico.