US, China Hold 'Frank' Talks on Hacking Row

Top US and Chinese officials were set to join "candid" talks Tuesday on the "complicated but consequential" ties between the world's two leading economies, with maritime disputes and cyber-hacking high on the agenda.

About 400 Chinese officials have converged on Washington for the high-level annual talks being hosted by Vice President Joe Biden, Secretary of State John Kerry and Treasury Secretary Jacob Lew.

"The United States is firmly committed to improving its relationship with China," said State Department spokesman John Kirby, about the seventh round of dialogue.

"While our countries disagree on many points, we recognize that there are many areas for mutually beneficial cooperation," he told reporters, adding there was "no problem (that) can't be better addressed with US-China cooperative efforts."

The two-day Strategic and Economic Dialogue kicks off properly on Tuesday with Kerry and China's State Councillor Yang Jiechi.

It will be Kerry's first public appearance back at work since he broke his right leg in a cycling accident on May 31.

But Deputy Secretary of State Tony Blinken led initial closed-door talks Monday on the toughest dossier security with China's Executive Vice Foreign Minister Zhang Yesui.

So far, the discussions have been "candid and to the point" in dealing with the "most sensitive issues in the relationship," a senior State Department official said.

The security talks serve as the highest-level platform for military and civilian discussions seeking to manage their complex ties.

"The relationship between the United States and China is extremely broad. It's also extremely complicated. But it's very consequential," the official said.

While there are important areas of cooperation such as the Iran nuclear talks, the situation in Afghanistan and the need to tackle climate change, there are also major differences.

"The talks are all the more important for the need to address these issues head-on, not try to paper them over, not try to agree to disagree, but to try to actually talk about them and see if we can... try to narrow the differences," the official said.

The talks allowed the US to "break through stovepipes in the government... and deliver messages to people outside of our normal channels of communication," the official added.

Chinese state news agency Xinhua reported that the sides agreed to work particularly on building a "stable" security relationship.

Differences
The world's two leading economies remain at odds over China's claims to much of the South China Sea and Washington has repeatedly urged Beijing to stop building artificial islands in the area.

But China said last month it will project its military power further beyond its borders at sea and more assertively in the air.

Ties have also strained over US accusations of cyber-espionage and the two countries have continuing differences about human rights.

A bilateral cyber working group was suspended by Beijing last year after Washington indicted five Chinese military officers for hacking into US computers to pilfer US government secrets.

This week's talks come hot on the heels of the revelations of devastating breaches of US government computer networks an issue US officials said they would raise directly with their Chinese guests.

The US administration has not openly accused Beijing of hacking into some 14 million employee records of the Office of Personnel Management, but the massive data breach is under investigation by the FBI.

On the economic track, the two countries will discuss trade issues, as the US pushes a huge Asia trade pact, which would not include China.

China in turn is trying to drum up support for its Asian Infrastructure Investment Bank spurned so far by the US.

China's yuan currency, a source of tension for years, will also be discussed as Beijing pushes for it to have a greater global role such as being part of the IMF's international basket of reference currencies.

Washington has long claimed the yuan was manipulated, but the IMF said late last month it was "no longer undervalued."

Kerry and Lew also hosted a dinner at Mount Vernon late Monday for Yang and Vice Premier Wang Yang.