China grabs limelight with US hobbled

NUSA DUA, Indonesia (AFP) - China took centre-stage on Monday as Asia-Pacific leaders opened an annual economic summit in the shadow of global growth clouds that are darkening by the day with the US government paralysed by infighting.

The US federal shutdown has stopped President Barack Obama from attending the two-day Asia-Pacific Economic Cooperation (Apec) summit on the Indonesian island of Bali, and another summit this week of East Asian leaders in Brunei.

US Secretary of State John Kerry stressed anew President Obama's determination to remain engaged with the Pacific Rim region, but his absence has left the arena clear for the leader of one-party China to trumpet the mounting heft of the world's second largest economy.

In a speech to Apec business leaders, President Xi Jinping insisted there was "enough space to sail together" despite territorial disputes in Southeast Asia and tensions with Washington.

"China cannot develop in isolation of the Asia-Pacific and the Asia-Pacific cannot prosper without China," he said, stressing that his country's recent economic slowdown was the intended result of policies designed to put growth on a more sustainable path.

"China will firmly uphold regional peace and stability," President Xi added. "Without peace, development is out of the question, like water without a source or a tree without roots."

He also assured that China’s economy is on a smooth and controlled slowdown, saying that there was no reason to fear a hard landing.

"The change... has on the whole been smooth,” Mr Xi said, after detailing the slowing of the world’s second biggest economy from 2011. “Nothing has come as a surprise... the slowdown of the Chinese economy is an intended result of our own regulatory initiatives.”

The communist leader has been touring Southeast Asia, where there is much disquiet about China's territorial ambitions, and also touted the benefits of free-trade pacts after securing commercial deals worth tens of billions of dollars in Indonesia and Malaysia.

China is involved in talks on a trade agreement grouping 16 East Asian nations just as Washington's rival Trans-Pacific Partnership (TPP) of 12 countries appears to be running into trouble.

While sympathetic to Mr Obama's political plight, the leaders of US allies in Apec such as Singapore expressed disappointment that he had been unable to throw his presidential weight personally behind the TPP and Washington's stop-start "pivot" towards Asia.

Foreign friends and rivals alike, as well as financial markets, are worried by a threat bigger even than the shutdown: the possibility that the US government might default on its colossal debts unless Congress raises the federal borrowing limit by October 17.

An unprecedented default by the holder of the world's reserve currency would affect "the entire planet, and not just those countries with a strong geographical and economic linkage to the US", Mexican President Enrique Pena Nieto said at an APEC business summit.

Russian President Vladimir Putin expressed similar sentiments to the business leaders gathered in Bali.

"The US dollar is still the biggest reserve currency in the world, so it is of utmost importance to all of us," he said.

But Mr Kerry, taking Mr Obama's place at Apec, said the president's epic tussle with the Republicans was merely "a moment in politics" that did not deflect the United States from its strategic goals.

"I want to emphasise that there is nothing that will shake the commitment of the rebalance to Asia that President Obama is leading," Mr Kerry told the business forum.

The United States is stumbling politically at a moment when, according to a statement by Apec foreign and trade ministers, the world economy can ill afford more instability following the 2008 financial crisis.

Previewing Tuesday's final summit declaration in Bali, the ministers said that "global growth is too weak, risks remain tilted to the downside, and the economic outlook suggests growth is likely to be slower and less balanced than desired".

Before he called off his foreign travel, Mr Obama intended to throw his presidential weight behind a top-level round of talks among the TPP countries in Bali on Tuesday.

But doubts about the TPP are gathering pace, and also about Obama's vaunted "pivot".

Attending APEC "would have been a golden opportunity for America and President Obama himself to show leadership in that context of the new emphasis towards Asia", Malaysian Prime Minister Najib Razak said.

Mr Obama was also forced to cancel visits to Malaysia and the Philippines due to the shutdown.

The perennial disputes that hobble all trade agreements, such as market access and protection of intellectual property, are rearing anew in the TPP negotiations and Dr Najib sees the end-of-year deadline as "very tight".

But Mr Kerry said a deal was still achievable in the timeframe, as he sought to sell the merits of the pact.

"At a time when all of us seek strong and sustainable growth, TPP is creating a race to the top, not to the bottom. It is reaching for the highest standards of all," he said in his speech.