WASHINGTON (Reuters) - President Barack Obama hosted exiled Tibetan spiritual leader the Dalai Lama at the White House Thursday, drawing an angry reaction from China and risking further damage to strained Sino-U.S. ties.

Raising issues that quickly stoked China’s ire, Obama used his first presidential meeting with the Dalai Lama to press Beijing, under international criticism for its Tibet policies, to preserve Tibetan identity and respect human rights there.

Obama sat down with the Dalai Lama -- who is reviled by the Chinese government as a dangerous separatist but admired by many around the world as a man of peace -- in the face of wider tensions over U.S. weapons sales to Taiwan, China’s currency practices and Internet censorship.

While defying Beijing’s demands to scrap the talks and showing a willingness to irritate an increasingly assertive China, the White House took pains to keep the encounter low-key, barring media coverage of the meeting. But it later posted a photo on its official website of the two men side by side in conversation.

Beijing clearly was not placated, saying it was “strongly dissatisfied” about the meeting and expected Washington to take steps to put bilateral relations back on a healthy course.

Chinese Foreign Ministry spokesman Ma Zhaoxu said the meeting between Obama and the Dalai Lama “violated the U.S. government’s repeated acceptance that Tibet is a part of China and it does not support Tibetan independence.”

Beijing did not threaten retaliation and its response was in line with past denunciations of U.S. dealings with the Dalai Lama. But the visit could complicate Obama’s efforts to secure China’s help on key issues such as imposing tougher sanctions on Iran and forging a new global accord on climate change.

Senior Chinese military officers recently had proposed their country possibly sell part of its huge stockpile of U.S. bonds to punish Washington for the a proposed $6.4 billion arms sale to Taiwan, which China considers a renegade province.

“The thought process is definitely there, and it’s worrying,” said T.J. Marta, president of Marta on the Markets, a financial research firm in Scotch Plains, New Jersey,

China did in fact reduce its holdings of U.S. Treasuries to $755.4 billion in November, seen by some analysts as a sign of protest at U.S. policies.

But with China ranked as the United States’s second-biggest creditor to the United States, White House economic adviser Larry Summers played down the significance of Beijing’s $34 billion paring-back of its portfolio.

Adding to tensions, Obama vowed recently to address currency issues with Beijing and to “get much tougher” with China on trade. Washington complains that China keeps its currency undervalued, hurting the competitiveness of American goods.

OBAMA PRAISE FOR DALAI LAMA

After the 70-minute meeting, the White House said Obama “commended the Dalai Lama’s ... commitment to nonviolence and his pursuit of dialogue with the Chinese government.”

Obama encouraged China and the Dalai Lama’s envoys to keep up efforts to resolve their differences through negotiations, despite recent talks having yielded little progress.

The White House said Obama and the Dalai Lama also “agreed on the importance of a positive and cooperative relationship between the United States and China.”

Speaking later to reporters at his hotel, the Dalai Lama, who fled his homeland in 1959, insisted, “We are fully committed to remain in the People’s Republic of China.” But he reiterated his longstanding call for “meaningful autonomy.”

Slideshow ( 10 images )

The United States says it accepts Tibet is part of China but wants Beijing to address differences over the region’s future.

With the U.S. and Chinese economies so deeply intertwined, tensions are considered unlikely to escalate into outright confrontation. The White House expects only limited fallout.

By going ahead with the meeting over Chinese objections, Obama may have wanted to show his resolve against Beijing after facing criticism at home for being too soft with China’s leaders on his trip there in November.

On the eve of the Dalai Lama’s visit, White House spokesman Robert Gibbs insisted the United States and China -- the world’s largest and third-biggest economies -- have a “mature relationship” capable of withstanding disagreements.

Slideshow ( 10 images )

FOCUS ON TIBET

Honoring the Dalai Lama and focusing on Tibet’s plight could still help Obama burnish his credentials among human rights activists, who say he has focused on global issues with Beijing at the expense of promoting Chinese reforms.

China, which cracked down on unrest in Tibet in 2008, has accused Washington of meddling in its internal affairs.

“The president stated his strong support for the preservation of Tibet’s unique religious, cultural and linguistic identity and the protection of human rights for Tibetans in the People’s Republic of China,” the White House said.

Mindful of Chinese sensitivities, the White House sought to strike a balance in the Dalai Lama’s visit. It came at a time when China was still fuming over a U.S. plan to sell $6.4 billion in arms to Taiwan, which China considers a renegade province.

Obama delayed meeting the Dalai Lama until after first seeing Chinese leaders during his Asia trip last year.

During Thursday’s visit, Obama -- like his White House predecessors -- denied the Dalai Lama the symbolism of meeting in the Oval Office. Instead they met in the lesser-known Map Room. Such distinctions signaled to Beijing that the Tibetan monk was not being received as a political leader.

China has become bolder, spurred not only by its economic clout but a sense in Beijing that the global economic crisis exposed the weakness of U.S.-style capitalism.