President says China would be stronger if it 'liberalises system' as senior diplomats consider options for Chen Guangcheng

Barack Obama has signalled his support for the blind Chinese dissident at the centre of a stand-off between Beijing and Washington, saying China would be stronger if it improved its human rights record.

Obama, speaking at a press conference in Washington on Monday, said he would not address the specifics of the Chen Guangcheng case, but then went on to call for Beijing to address its human rights record.

"We think China will be stronger as it opens up and liberalises its own system," the president said, in his first comments since Chen fled house arrest to seek US diplomatic protection in Beijing at the end of last week.

He added: "We want China to be strong and we want it to be prosperous, and we're very pleased with all the areas of cooperation that we've been able to engage in. But we also believe that that relationship will be that much stronger and China will be that much more prosperous and strong as you see improvements on human rights issues."

A senior US diplomat, Kurt Campbell, flew to China on Sunday before a planned visit to open negotiations with Chinese officials.

Such is the sensitivity of the issue that the US has been refusing to talk publicly about it. America has not so far confirmed Chen is under its protection or that negotiations with the Chinese are under way.

The impasse comes at an awkward juncture in US-China relations, just days before scheduled annual talks on economic and strategic matters between secretary of state Hillary Clinton, Treasury secretary Timothy Geithner and their Chinese counterparts in Beijing on Thursday and Friday. Both Washington and Beijing confirmed the talks will go ahead as planned.

The US is looking at options for Chen, ranging from asylum in the US to extracting a guarantee from the Chinese government that neither he nor his family will be harmed.

Chen's friends say he does not want to leave China and would settle for a guarantee of protection and an investigation into his maltreatment by local government officials over the past six years. China analysts think the chances of Beijing agreeing to the latter is a remote possibility.

Zeng Jinyan, an activist and friend, said any move overseas by Chen

would be bittersweet. "I would be absolutely happy for him and his family, but it would reveal that the environment for rights defenders is worsening," said Zeng. "It would feel desperate if even the most important activist – someone who has the wisdom and ability to make changes in China – had to go into exile to protect his safety."

Chen, a prominent opponent of forced abortion as part of China's one-child policy, escaped from his village home in Shandong province at the end of last week after 19 months of house arrest.

Obama was asked about the Chen case at a press conference, but refused to be drawn on detail because of the delicate nature of the discussions. "Obviously, I am aware of the press reports but I am not going to make a statement on the issue."

Conscious of criticism by Republicans that he is too soft on China over human rights issues, Obama defended his adminstration's record. "What I would like to emphasise is that every time we meet with China, the issue of human rights comes up. It is our belief that it is the right thing to do."

He added that it was also the US belief that an improvement in China's human rights record would make the country stonger and more prosperous.

The Chen case presents Obama with a difficult challenge: on the one hand he needs to be seen as a champion of human rights, but on the other, he does not want to endanger US trade and other relations with China. The Republicans regularly characterise him as soft on China, and his Republican presidential opponent, Mitt Romney, on Sunday called on Obama to ensure Chen is protected.

The European Union urged China on Monday to "exercise utmost restraint" in Chen's case and avoid "harassment of his family members or any person associated with him". Two activists – Hu Jia and Guo Yushan – have been released after being put under police detention, but there are concerns for He

Peirong, who helped Chen escape, and his cousin, Chen Kegui.

The Chinese government is in a strong position economically, holding much of US debt, and is unlikely to agree to anything that might be viewed as a humiliating climbdown, particularly over human rights.

Diplomat sources say the two nations will try to keep the issue low-key so that it does not disrupt the US-China meeting later this week.

Relations between the US and China had been improving in recent months, with Beijing being more co-operative with Washington on issues ranging from Iran to North Korea. In spite of this, there are continuing serious strains between the two competing nations over a planned US arms sale to Taiwan and the US strengthening its relations with other countries in the Pacific.

The latter was underscored on Monday by a visit to the White House by the Japanese prime minister Yoshihiko Noda, and meetings between Clinton and US defence secretary Leon Panetta with their counterparts from the Philippines.

Mike Green, senior director for Asian affairs in the national security council in the Bush administration and now an associate professor in international relations at Georgetown University, said: "Clinton will not be deterred from pressing China on the Chen issue because of economic interdependence … The fact that this is an election year in the United States only adds to the importance of standing firm on human rights."

Green added: "On the other hand, with seven of nine politburo standing committee seats up for grabs and a leadership transition to Xi Jinping this year, the Chinese side cannot appear to back down on this case either. The diplomats in the middle, like assistant secretary of state Kurt Campbell and Chinese deputy foreign minister Cui Tankai, are looking for what will be an elusive win-win solution. Those two are talented and may find it."

Phelim Kim, of Human Rights Watch, was less optimistic about the outcome. "If – as seems to be the case – Chen Guangcheng is indeed under some form of US government protection, it has all the makings of thediplomatic equivalent of a slow-motion car crash. The lesson of Chen Guangcheng and US-China relations is that when governments don't purposely weave meaningful and substantive discussions on human rights into the fabric of key bilateral discussion on a regular basis, they risk those issues forcing their way onto the agenda in ways unforeseen."

In 1989, Chinese dissident Fang Lizhi stayed in the US embassy in Beijing for 13 months before leaving for the US.