China's Hu meets US Gates after "candid" talks

BEIJING, Nov 6 (Reuters) US Defense Secretary Robert Gates met Chinese President Hu Jintao today as the countries boost cooperation despite differences over issues of transparency and China's military buildup.

The meeting followed talks on Monday between Gates and Chinese defence officials during which the two sides agreed to set up a hotline but remained at odds over China's military modernisation and an anti-satellite missile test.

''There are clearly areas of agreement and areas of disagreement and we agreed that talking about both was good for the relationship,'' Gates told Hu at the start of their meeting.

Both called Monday's talks ''candid'' and ''friendly'', despite persistent US complaints that Beijing has not sufficiently explained why its billion military budget is posting double-digit growth.

''I believe that through this visit, you will be able to have a better understanding and vice versa and it will be conducive for the building of a deeper trust between us...,'' Hu said.

The comments reflect a much warmer relationship since the two militaries broke off contact in 2001 following a collision between a Chinese fighter jet and a US spy plane.

Still, many differences remain, both over the nature of China's rise and their positions on international issues.

Gates said his Chinese counterpart, Cao Gangchuan, did not adequately explain why Beijing shot down one of it own satellites with a ground-based missile in January, a move that raised the spectre of a space arms race. China says its space programmes are entirely for peaceful purposes.

Both countries are also veto-wielding members of the UN Security Council, and Gates said they discussed the ''importance of Iran not having nuclear weapons''.

Washington is seeking tougher UN sanctions on Iran, but China favours negotiations to resolve the issue of Iran's nuclear programme, which Tehran says is purely for energy generation but Washington believes is aimed at producing an atomic bomb.

REUTERS ARB BD0925