July 27 (Bloomberg) -- President Barack Obama said the relationship between the U.S. and China will “shape the 21st century” and that neither nation should be wary of competition and coordination.

“No one nation can meet the challenges of the 21st century on its own, nor effectively advance its interests in isolation,” Obama said at the opening of a two-day summit on economic and strategic cooperation with China in Washington.

“Some in China think that America will try to contain China’s ambitions; some in America think that there is something to fear in a rising China,” he said. “I take a different view.”

At stake is continued demand by China, the largest foreign investor in U.S. Treasuries, for the unprecedented issuance of American government debt. The U.S. also wants China to continue financial industry reform and development, and increase domestic demand to reduce dependence on exports.

“The relationship between the U.S. and China will shape the 21st century,” making it the most important bilateral relationship in the world, Obama said.

Agenda

The talks are hosted by Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner. Obama said the agenda includes strengthening the financial system, and investing in energy, education and health care, as well as cooperating on climate change, trade and confronting the nuclear ambitions of North Korea and Iran.

The top Chinese delegates are Chinese State Councilor Dai Bingguo and Vice Premier Wang Qishan.

Chinese President Hu Jintao, in a written message sent from Beijing, said that China and the U.S. “shoulder important responsibilities on a host of major issues concerning peace and development.”

Hu called on the two sides to “conduct consultations in an equal and candid manner,” to “seek win-win progress.”

Since the global financial crisis was ignited in the U.S. last year, and the enactment in February of the Obama administration’s $787 billion stimulus program, Chinese officials have expressed concern about the prospects for the U.S. economy and the health of their investments.

“We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets,” Chinese Premier Wen Jiabao said during a March 13 press conference after the stimulus package became law. “To speak truthfully, I do indeed have some worries.”

Global Economy

Obama said the financial crisis “has made it clear that the choices made within our borders reverberate across the global economy -- and this is true not just of New York and Seattle, but Shanghai and Shenzhen as well.”

China is still buying U.S. government notes and bonds, increasing its holdings to $802 billion, double the $401 billion at the beginning of 2007, Treasury Department figures show.

The value of China’s currency, the yuan, is also on the agenda. The U.S. regards China’s currency policy as a distortion and wants China to let the value of the yuan appreciate.

The staff of the International Monetary Fund has concluded that China’s yuan is “substantially undervalued,” Nigel Chalk, head of the lender’s Asia-Pacific division, said on a conference call July 23.

Geithner also plans to talk with Chinese officials about U.S. concern over China’s resistance to foreign investment, an Obama administration official said. The U.S. will tell the Chinese that the American rebound from a recession won’t be led as much by consumers as past recoveries. The U.S. will urge China to rely more on household spending and less on exports for growth.

Nuclear Cooperation

Obama appealed to China to help to prevent Iran from acquiring a nuclear weapon and for its continued aid in thwarting North Korea’s nuclear program.

He called for the two nations to strengthen the Nuclear Non-Proliferation Treaty “by renewing its basic bargain: countries with nuclear weapons will move toward disarmament; countries without nuclear weapons will not acquire them; and all countries can access peaceful nuclear energy.

“A balance of terror cannot hold,” he said.

Obama said he intends to visit China in the future. That may come in November, when Obama is scheduled to attend the Asia Pacific Economic Cooperation forum in Singapore.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Kate Andersen Brower in Washington at Kandersen7@bloomberg.net

Last Updated: July 27, 2009 10:12 EDT