'The best way (forward) is that China starts adopting its own monetary policy and detaching itself from the Fed's policy,' ECB Executive Board member Lorenzo Bini Smaghi said in Istanbul at International Monetary Fund and World Bank meetings.
'Systemically important countries should start implementing their own policies and de-pegging themselves from the dollar,' he said.
Tracking the dollar makes it hard for policymakers to avoid tracking interest rate moves by the U.S. Federal Reserve.
Bini Smaghi's comments chime with ECB Governing Council member Axel Weber, who said the foreign exchange rates of certain countries were being 'artificially stabilised by economic policy interventions'.
'We need to talk to some Asian countries about this,' Bini Smaghi said, adding that China was one of these countries.
'A lot of Asian countries still have a strong peg to the dollar and correspondingly low interest rates at the moment. By buying up currencies, monetary policy is more expansive there than the economic situation actually permits. I expect that we will see foreign exchange rates becoming more flexible.'
China has repeatedly declared it is in the process of reforming its exchange rate system to allow the yuan to move more flexibly, but that it will not allow moves that could destabilise its economy.
In practice, China's central bank has kept the yuan almost flat against the U.S. dollar since July 2008, when the global financial crisis began worsening.
During the depths of the crisis, that policy drew relatively little international criticism, as China appeared to be providing badly needed stability to global markets.
But now that the world economy is recovering, China is starting to receive more public pressure to let its currency appreciate, as a way of cutting its huge trade surplus and correcting global imbalances.
Bini Smaghi also said some developed countries have not accepted the implications of globalised markets and are trying to grow by borrowing future resources.
'Maybe some parts of the advanced world have to grow less to let other parts grow faster. Some parts of the advanced world have accepted we have to grow less but some parts have not accepted that and are trying to grow more by borrowing on the future,' he said.
Bini Smaghi also said central banks should look more carefully at money and credit growth when setting interest rates to avoid the formation of asset bubbles.
(Reporting by Gavin Jones, writing by Sakari Suoninen; Editing by Ruth Pitchford) Keywords: ECB/BINI SMAGHI (email@example.com; +49 69 7565 1267; Reuters Messaging: firstname.lastname@example.org) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.