THE US and China traded guarded criticisms over currency issues at a Group of 20 financial seminar in the Chinese city of Nanjing, with US treasury secretary Timothy Geithner saying tightly controlled exchange rate regimes were the main flaw in the international monetary system and the solution was more flexibility.

Forming the backdrop to the one-day seminar on the international monetary system were a number of serious issues, including rising prices, the crisis in Japan sparked by the earthquake and tsunami there, armed Nato intervention in Libya, and the euro zone crisis, with the heightened prospect of a bailout of Portugal and the Irish bank stress tests clearly on the agenda.

This G20 seminar was remarkable as much for what it failed to mention as for what it did mention. Asked about the stress test of Irish banks and the plight of Portugal, European Central Bank president Jean-Claude Trichet declined to comment.

French president Nicolas Sarkozy, opening the meeting, did not mention the world’s two biggest economies, the US and China, both of whom have been criticised for keeping their currencies artificially low to support growth.

One of the more interesting possible topics for discussion at the talks – China’s exchange regime – was ruled out as a talking point by Beijing shortly before the meeting, despite ongoing criticism that its yuan currency is massively undervalued, giving it an unfair trade advantage.

In a veiled reference to this taboo subject, Mr Geither said easing controls on exchange rates and shifting to more market oriented policies are key steps toward managing rising prices.

“This is the most important problem to solve in the international monetary system today. But it is not a complicated problem to solve,” said Mr Geithner. “It does not require a new treaty, or a new institution. It can be achieved by national actions,” he added.

He said that growing asymmetry was causing inflation risks in economies whose exchange rates are undervalued, magnifying currency appreciation in others and generating protectionist pressures.

Beijing signalled its frustrations with Washington’s stimulus policies, which the Chinese say are fanning strong increases in commodity prices. China, Brazil and South Korea all previously criticised the Federal Reserve’s $600 billion (€424 billion) programme for driving down the dollar and fueling asset bubbles in emerging markets.