* Two sides to work to "get credit markets flowing"
* Need for frequent, high level military exchanges cited
* Talks touch on North Korea, Sudan, Tibet
By Caren Bohan and Paul Eckert
WASHINGTON, March 12 (Reuters) - U.S. President Barack Obama and Chinese Foreign Minister Yang Jiechi on Thursday called for urgent steps to revive the world economy and agreed to work to prevent further military confrontations at sea.
"The two agreed that China and the U.S. must work closely and urgently, as two of the world's leading economies, to stabilize the global economy by stimulating demand at home and abroad, and get credit markets flowing," the White House said in a statement after the two held a meeting.
Tensions between the United States and China rose over a weekend incident in the South China Sea in which five Chinese ships jostled with a U.S. Navy surveillance vessel.
The United States has said its ship, the Impeccable, was in international waters. But Beijing has said the U.S. ship was in the wrong and Chinese naval officers have argued that it violated their country's sovereignty.
After meeting on Wednesday with Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, Yang visited the White House on Thursday to meet with Obama and National Security Adviser Gen. James Jones.
During Obama's 45-minute meeting with Jones and Yang, Jones raised the issue of the South China Sea incident.
Obama "stressed the importance of raising the level and frequency of the U.S.-China military-to-military dialogue in order to avoid future incidents," the White House said.
A U.S. Navy destroyer, the USS Chung-Hoon, began escorting the Impeccable on Wednesday in a move to prevent any repeat of the weekend incident, U.S. defense officials said, speaking on condition of anonymity.
The destroyer, armed with missiles and torpedos, provides robust protection for the unarmed Impeccable, whose mission is to search for submarines and other undersea threats.
Yang, addressing a Washington think tank earlier in the day, did not discuss the naval confrontation and instead focused on the global economic crisis.
Obama and Chinese President Hu Jintao will attend next months's summit in London of the Group of 20 major developed and emerging economies.
'BETTER COORDINATION'
Ahead of that meeting a rift has opened between the United States, which has been calling for aggressive economic stimulus steps, and some European countries wary of that approach. Yang said "better coordination" was needed among China, the United States and other countries that have announced stimulus plans.
"We have to make sure that people will look at the bright side of our efforts," he said in remarks to the Center for Strategic and International Studies.
"The magic word is confidence," he said. "I hope the G20 meeting will boost people's confidence." [ID:nN12389836] [ID:nSP437959]
China was focusing on implementing its more than $600 billion stimulus package to boost domestic demand and improving the social safety net in China, Yang said, adding that some measures have produced signs of economic recovery.
The White House had said the meeting between Yang and Obama were scheduled prior to the ship incident and was a gesture of reciprocity after Hu met with Clinton during her trip to Asia last month.
Despite the tensions raised by the naval incident, the White House statement stressed the need to "build a positive and constructive U.S.-China relationship."
Obama said he would work with China and other countries to persuade North Korea to give up its nuclear weapons program and told Yang he was concerned about Pyongyang's missile program.
North Korea last month said it was preparing to launch a satellite on one of its rockets, which analysts believe could be a test of its longest-range missile.
Obama urged Yang to help put pressure on Sudan's government after it expelled aid groups helping to provide food, shelter and protection to 4.7 million displaced people in Darfur.
"On Darfur, President Obama expressed his deep concern about the unfolding humanitarian crisis," the statement said.
During the meeting, Obama raised the sensitive issue of Tibet, saying he hoped there could be a dialogue between the Chinese government and the Dalai Lama's representatives.
The Nobel Prize-winning Dalai Lama marked March 10 as the 50th anniversary of a failed uprising against Chinese rule that resulted in his exile to India. China, which prides itself on bringing economic development to Tibet, accused the United States of meddling in its affairs.
At CSIS, Yang said U.S. critics of Beijing's policies failed to appreciate the economic development China brought to the region. "Tibet is an inalienable part of Chinese territory and Tibetan affairs are exclusively China's internal affairs," he said in a restatement of China's official position. (Writing by Caren Bohan and Paul Eckert; additional reporting by Matt Spetalnick and Andrew Gray; editing by Todd Eastham)