By Adam Jourdan

SHANGHAI (Reuters) - Brazil's newly installed president Michel Temer said the Senate's decision to allow former president Dilma Rousseff to maintain her political rights was a "small" embarrassment, and played down its significance to the stability of his government.

Temer was speaking on the sidelines of a business summit in Shanghai, after arriving in China on Friday to attend a G20 leaders' meeting in Hangzhou, his first global event after this week's impeachment of his predecessor.

"For more than 34 years I've been in public life and constantly followed these types of small embarrassments that are quickly overcome," he told reporters.

"From the beginning I have always said I would wait respectfully for the Senate decision. The Senate made that decision, wrongly or rightly, but the Senate made that decision."

Brazil's Senate on Wednesday decided that Rousseff could maintain her political rights, a break with Brazilian law that says a dismissed president should be barred from holding any government job for eight years.

Brazilian assets seesawed after the dismissal on market fears over division in Temer's alliance following the Senate's vote, which ended 13 years of progressive Workers Party rule.

Rousseff's impeachment also sparked angry reaction from leftist governments across the region. Venezuela, Bolivia and Ecuador withdrew their ambassadors and Brazil responded by recalling its envoys for consultations.

Foreign Minister Jose Serra, who was speaking alongside Temer, denied that Rousseff's removal was hurting Brazil's reputation overseas, adding that the impact of the ambassadors' recalls would be felt by their countries.

China has expressed confidence in Brazil's ability to maintain stability after the ousting of Rousseff, a message President Xi Jinping repeated during a meeting with Temer later in Hangzhou.

"China has great confidence in Brazil's development prospects, as well as confidence in cooperation between China and Brazil," Xi said.

"We must continue to treat each other as partners in development and strengthen cooperation, and make China-Brazil cooperation a highlight in unity and cooperative relations between developing countries."

Temer told Xi that he wanted to reiterate "the need to maintain the solid relationship that has been built up over time".

Brazil and China are both in the BRICS group of emerging economies that includes India, Russia and South Africa.

(Additional reporting by Ben Blanchard in BEIJING and Elzio Barreto in HONG KONG; Writing by Brenda Goh; Editing by Clarence Fernandez, Robert Birsel)