U.S., China Pledge Cooperation

China and the United States pledged closer cooperation on financial regulation and energy Tuesday but made no breakthroughs on currency exchange rates.

BEIJING (AP) -- The United States and China pledged closer cooperation on financial regulation and energy Tuesday but made no breakthroughs on currency exchange rates in a high-level dialogue overshadowed by Korean tensions.

China agreed to modify a policy on promoting domestic technology development that Washington and others complain might hamper trade. U.S. officials said they still have concerns and the two sides will hold more talks in coming months.

"This round of the dialogue did not solve all our problems but did produce concrete results," U.S. Secretary of State Hillary Rodham Clinton said after the second annual meeting of the Strategic and Economic Dialogue.

Both sides praised the dialogue as a vital tool for easing trade strains and promoting economic and political ties. But the talks also highlighted the divisions between them and Beijing\'s growing assertiveness in promoting its own interests.

The meeting produced no progress on China\'s currency controls, a key irritant in relations with Washington. Chinese President Hu Jintao promised currency reforms Monday but gave no time frame and said Beijing would set the pace of change.

Washington and other trading partners complain China\'s yuan is undervalued, giving its exporters an unfair advantage. The yuan has been frozen against the dollar since late 2008 to help Chinese manufacturers compete amid weak global demand.

Treasury Secretary Timothy Geithner, the U.S. economic envoy to the dialogue, declined to say when his department might release a report on whether Beijing is a currency manipulator, which could lead to sanctions. The report was due April 15th but Geithner delayed it, saying international meetings this year were a better way to advance Washington\'s position.

The two governments announced modest agreements to cooperate in banking and financial market regulation and development of alternative energy.

Washington pledged help, including from the U.S. Geological Survey, to develop China\'s resources of clean-burning shale gas.

"We believe that could well lead to new economic opportunities in both countries and a lower carbon output level," Clinton said.

Beijing\'s envoys pressed a range of Chinese interests, calling Monday for an end to U.S. curbs on technology exports with possible military applications and urging Washington to simplify foreign investment rules that they complained hurt Chinese companies.

The meeting, which brought 200 U.S. officials including Cabinet secretaries in health, commerce and other fields to Beijing, was overshadowed by tensions over the sinking of a South Korean warship, which Seoul blamed on rival North Korea.

Clinton said Monday she hoped for China\'s support for international action against the North. But the Chinese government reacted coolly, calling on "relevant parties" to "calmly and properly handle the issue and avoid escalation of tension."

Geithner said the two sides agreed to cooperate through the International Monetary Fund to help resolve the European debt crisis.

On technology, Geithner said Beijing promised to modify its "indigenous innovation" policy, meant to promote Chinese technology by favoring domestic products in government procurement and other areas. Foreign companies say the policy is the biggest threat to their access to Chinese markets.

Geithner said China promised to abide by principles of nondiscrimination and to leave the terms of technology transfer to agreements between enterprises. He said Washington had more concerns about the policy and U.S. Trade Representative Ron Kirk and other officials would hold talks with China in coming months.

A Chinese official said Monday that Beijing would treat foreign-owned companies in China equally with local rivals but would press ahead with its plan to favor enterprises within the country.

Beijing committed to a July deadline to submit a new proposal for joining the Government Procurement Agreement, a treaty that extends World Trade Organization free-trading principles to official purchases. That could help in addressing complaints by foreign companies that they are excluded from government-financed energy and other projects.

Earlier Tuesday, Geithner appeared at a school for future Communist Party leaders and said Washington is cutting its budget deficit -- a key worry for Beijing, the biggest foreign investor in U.S. government debt.

"The basic strategy is to make sure that our economy is growing, then institute long-term reforms and restore the basic discipline to the budget process that we abandoned in the previous decade," Geithner said at the Central Party School.

Geithner\'s visit to the school, a mid-career training center for rising officials from provincial governments, was billed as a chance for Washington to reach beyond Beijing and address a future generation of Communist leaders.