Beijing: Notwithstanding their competing interests, China and the US today vowed to improve their ties and not allow persistent differences over Beijing’s maritime claims, cyberhacking and currency rates to impact a globally crucial relationship.

Warning of serious consequences if the conflict continued, Chinese President Xi Jinping told an annual meeting of top diplomats and officials of the two countries here today that “China-US confrontation, to the two countries and the world, would definitely be a disaster”.

“We should mutually respect and treat each other equally, and respect the other’s sovereignty and territorial integrity and respect each other’s choice on the path of development.”

Playing the down the increasingly difficult relationship, he said “it is natural that China and the US may have different views and even frictions on certain issues” given their different histories and cultures.

 “This is what makes communication and cooperation even more necessary,” he said speaking at the historic guest house where then US President Richard Nixon met Mao Zedong on his groundbreaking visit to China in 1972.

Nixon’s visit laid the foundation for hardline Communist China to come out of an ideological morass and its emergence as the world’s second largest economy riding on the crest of large inflows of FDI and technology.

The sixth US-China Strategic and Economic Dialogue (SED) is being attended by Secretary of State John Kerry and Treasury Secretary Jacob Lew besides Federal Reserve chief Janet Yellen and three other senior administration members.

The SED is taking place after a series of tensions between the two countries sparked by China’s increasing conflicts with US allies Japan, Vietnam and the Philippines over Beijing’s push to assert its claims over the East and South China Seas.

The two sides also had a tense stand off over NSA contractor Edward Snowdon pointing to US cyber espionage of several Chinese companies and counter allegations by Washington accusing China’s military of carrying out cyber surveillance on a number of US companies.

Xi said the two sides should moderate their tensions as “our interests are more than ever interconnected,” and both “stand to gain from cooperation and lose from confrontation”.

“If we are in confrontation it will surely spell disaster for both countries and for the world,” he said calling on both the countries, “to break the old pattern of inevitable confrontation”.

Apparently referring to a big US military push into Asia-Pacific, Xi said “the vast Pacific Ocean has ample space to accommodate our two great nations”.

In a statement sent for the opening of the dialogue, President Barack Obama said the US and China will not always see eye-to-eye on every issue.

That was “why we need to build our relationship around common challenges, mutual responsibilities, and shared interests, even while we candidly address our differences,” Obama said.

Ahead of the meeting Kerry told China’s state-run CCTV that US does not see China as an inevitable rival.

“We view China with hopes and possibilities with increasing partnership. It is very important relationship. We want China to understand that there doesn’t have to be rivalry”.

Though competition exists in some areas “it is much more important we find the ways to cooperate because the world needs leadership,” he said.

“China is a rising power and extraordinary economy and has huge responsibility as permanent member of the UN Security Council. US is working China on issues relating Iran and North Korea besides reducing tensions with Japan,” he said.

About Xi’s proposal to have a new model of relationship, Kerry said it is a good concept but still being defined.

“We want to have big power relationship with China. It is very important to eliminate frictions whether it is cyberspace or opening markets,” he said.

In the SED, US and Chinese officials discussed 60 topics including US allegations that China is deliberately keeping its currency exchange rate low to benefit its exports.

American firms also complain of lack of market access and unfair market restrictions.

Also the two countries, the world’s biggest emitters of carbon emissions announced eight new projects aimed at capturing and storing carbon, and setting up more efficient energy grids.

They also agreed to stronger fuel efficiency standards for cars and trucks and to study gas use in industrial boilers.

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