Obama steels for tough G20 summit

After basking in accolades in India and Indonesia, President Barack Obama faced a test of his leadership mettle Thursday at a G20 summit simmering with criticism of US economic policy.

Obama was due to hold high-stakes talks with Chinese President Hu Jintao and German Chancellor Angela Merkel, and to meet other leaders at a summit taking place amid sharp divisions over how to sustain the global recovery.

He also faced down-to-the-wire talks with President Lee Myung-Bak designed to salvage a US-South Korea free trade pact after months of negotiations failed to narrow gaps between the partners on a long-delayed agreement.

The G20 opens Thursday as China, the target of months of impatient US criticism over its currency policy, lashes back at Washington after the Federal Reserve said it would pump 600 billion dollars into the US economy.

The plan was denounced by China as indirect currency manipulation that could trigger a global meltdown, while Germany promised to deliver a frank message of concern to Obama and to the summit as a whole.

Obama, who has tried most of the stimulus options in his presidential policy toolbox, launched a staunch defence of the Fed while he was in India, arguing that a stronger US rebound was vital to global economic health.

He reinforced the message in a letter to other G20 leaders released as he flew into Seoul Wednesday.

"A strong recovery that creates jobs, income and spending is the most important contribution the United States can make to the global recovery," Obama's letter said.

"The dollar's strength ultimately rests on the fundamental strength of the US economy."

The US central bank's plan, dubbed quantitative easing, is aimed at getting more cash into the pockets of companies, consumers and homeowners by making borrowing cheaper, but there are concerns it will fuel inflation.

Obama's meeting with Hu will be closely watched to see if the leaders find a way to defuse several trade, currency and diplomatic disputes threatening to cast a shadow over a planned visit by Hu to Washington in January.

The meeting takes place during a four-nation Obama tour of Asia designed to expand US geopolitical influence and alliances, in a strategy seen in some quarters as a hedge against China's mounting economic and diplomatic clout.

But speaking in Indonesia on Tuesday, Obama said that Washington was in no way seeking to limit China's rise, and in fact welcomed it, despite often difficult Sino-US ties.

"We want China to succeed and prosper. It's good for the United States if China continues on the path of development that it's on," Obama said.

"We're not interested in containing that process.  We want China to continue to achieve its development goals," he said, while adding that Washington wanted to ensure each nation operated within a set of international rules.

In a testing last few months, Washington and Beijing have been at odds over China's yuan currency, which US officials say is kept artificially low to boost exports, and several nettlesome trade disputes.

Obama's talks with Lee were shaping up as a last chance to solve disagreements over auto and beef trade blocking adoption of the US-South Korea free trade pact signed more than three years ago.

US and South Korean trade negotiators have spent weeks in talks on the biggest US trade deal in years, but had failed to broker an accord before Lee and Obama's meeting at the presidential Blue House in Seoul.

Hopes rose last week the pact could be ratified in the US Congress when Obama's Democratic Party, heavily funded and influenced by labor unions opposed to the accord, lost the House of Representatives to Republicans.

Obama, who has in the past been accused of promoting anti-business policies, has made trade and opening up new export markets a key priority of his Asian tour as he seeks to reduce US unemployment stubbornly pegged at 9.6 per cent.

The president opened Veterans Day on Thursday by meeting US troops in Seoul, and warned nuclear-armed North Korea that Washington would never waver in support of South Korea.

Follow Emirates 24|7 on Google News.