The leaders of the two powerful nations met on the sidelines of a summit of 20 developed and emerging countries aimed at taking more effective steps to boost global economic recovery after the worst recession in decades.

The meeting came a week after Beijing, in a surprise move, said it would allow the yuan to move more freely against the dollar -- amid US concerns that the Chinese currency is undervalued compared to the greenback.

Hu said China hoped to "strengthen" coordination with the US on major regional and international issues, noting joint efforts had led to "real progress" in ties between the world's largest and third biggest economies.

"We need to continue to follow the spirit of staying the same course and uniting together," Hu said as the two leaders met for the sixth time in about 18 months.

Agreeing with the Chinese leader that "tremendous progress" had been made in improving relations, Obama said he would dispatch his top economic and security aides to China in early August for talks with Hu's advisors.

Obama also signaled to Hu that tensions over US arms sales to Taiwan, which Beijing considers a renegade province, should be put to rest.

Aside from the longstanding currency and Taiwan issues, China and the United States have been at loggerheads on an array of fronts ranging from trade to Internet freedom.

Earlier this month, US Defense Secretary Robert Gates called off plans to visit China after Beijing told the Pentagon the timing was "inconvenient," despite an invitation last year for Gates to visit in 2010.

It was an apparent snub over a 6.4 billion dollar arms package unveiled in January for Taiwan, including helicopters, Patriot missiles and mine-hunting ships.

In an indication that military dialogue was critical to better ties, Obama told Hu Saturday that the United States was "looking forward to an invitation for a visit" to Beijing by Gates "in the coming months."

Hu accepted an invitation from Obama to make a state visit, a senior White House official told reporters.

"The two sides will now discuss timing for the visit," Jeff Bader, the US administration's senior director for Asian affairs, said.

Obama warmly welcomed Hu on Saturday, saying: "It's wonderful to see you again."

"We worked very hard and our teams worked very hard in the past 15 months to build a relationship of trust, of mutual confidence, and it's my belief that we've accomplished many things," the US president added.

But the two leaders did not touch upon the prickly issue of China's undervalued currency in public remarks at their meeting, although Chinese officials before the talks vowed not to succumb to any pressure to let the yuan appreciate more rapidly.

"If there is a change in the renminbi (yuan) exchange rate it is up to the internal dynamics of the Chinese economy rather than be subject to the pressure of any individual country or international organization," said Ma Xin, who heads a key agency in Beijing which has broad controls over the economy.

Chinese policymakers pledged last weekend to let the yuan trade more freely against the dollar, but ruled out dramatic moves in the currency or a one-off appreciation.

The action was widely seen as a bid to head off rancor at the G20 summit following intense pressure on Beijing to embrace currency reform as part of efforts to enhance a global economic recovery.

Obama had welcomed the currency reform effort, but said it was too early to judge whether it would be effective, adding he wanted to raise the issue at the G20 summit.

US lawmakers also have vowed to push ahead with legislation imposing trade sanctions on China for not allowing the yuan to rapidly rise.

They have charged that China kept the currency artificially low to reap unfair trade gains that were costing US jobs and worsening the US deficit.

Some experts say the yuan is undervalued against the dollar by up to 40 percent.

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