Political tension may overshadow G-20, APEC summit

World leaders head to back-to-back economic summits in Asia next week, but regional political tensions - some spawned by China's growing assertiveness - could undermine attempts to project unity amid a faltering global economic recovery.

In Seoul, where leaders from the Group of 20 major global economies will gather next Thursday and Friday, tension remains high over the sinking of a South Korean warship earlier this year that has been blamed on North Korea.

Japan, which hosts the annual Asia-Pacific Economic Cooperation forum next weekend, is embroiled in a flare-up of territorial disputes with China and Russia that is stirring up rancor in all three countries and is already prompting economic fallout.

And while not on the official agendas, China's rise - its expanding maritime activities, growing political and economic clout and tension with Washington over its currency policy - will likely dominate in the flurry of one-on-one meetings between leaders on the sidelines.

Eager to display a united front in sustaining the fragile global economic recovery, President Barack Obama, Chinese President Hu Jintao, Japanese Prime Minister Naoto Kan and others will be seeking to minimize conflict at the summits.

"Those issues do cast a shadow over the meetings, and raise questions over whether they will be a success," said Charles Morrison, president of the East-West Center in Honolulu and co-chair of the Pacific Economic Cooperation Council. "A lot of it relates to China's growing role in the world, and how the world adjusts to China as a much larger player economically, politically and militarily."

On the surface at least, economic matters will dominate the agendas of both gatherings.
About half the leaders, including Obama, will attend both summits, which were scheduled close together to fit into leaders' busy schedules. That both are being held in Asia is partly coincidental, but also reflects the region's growing importance.

The driving force behind the G-20 summit, which brings together leaders from rich industrialized nations like the US, Germany and Japan and major emerging economies like Brazil, India and China, is to come up with steps to avoid another global financial crisis. It is the leaders' fifth meeting since they gathered in late 2008 to map out a global response to the meltdown that was rocking the world economy at the time.

Top of the list is setting measurable targets for reducing destabilizing trade and current account gaps. The biggest concern is the huge imbalance between the United States, which buys far more than it sells to the rest of the world, and developing countries, such as China, which are running big trade surpluses.

The G-20 nations, which account for 85 percent of the global economy, will also study proposed financial reforms, such as stricter standards and supervision for large banks and other institutions.

The Obama administration says that China's undervalued currency, the yuan, contributes to global imbalances because it gives Beijing a trade boost by making Chinese goods cheaper in the US and elsewhere. This issue won't be settled at the Seoul meeting, US officials say, with Washington apparently preferring to take a multilateral approach to curbing global imbalances so as to avoid a direct confrontation with China