BEIJING -- With protectionist sentiments on the rise on Capitol Hill, Federal Reserve Chairman Ben Bernanke backed away from his potentially incendiary charge that China subsidizes its exports by keeping its currency artificially weak against the dollar.

In a speech Friday after the close of two days of high-level U.S.-China talks in Beijing, Mr. Bernanke said that China's currency policies constitute an "incentive" to exporters and called them a "distortion" that steers investment towards export-related industries and away from industries that would benefit Chinese consumers.

Mr. Bernanke dropped, however, references in the original text of his speech that called China's suppression of the yuan's value an "effective subsidy" for firms that "focus on exporting rather than producing for the domestic market." The chairman had used the word "subsidy" to describe China's currency practices three times in the written text, which was released before his appearance and posted to the Fed's website.

Mr. Bernanke's speech, delivered to the Chinese Academy of Social Sciences, focused on the currency as one of the ways in which China could improve its economic management.

In addition to calling for greater currency flexibility by China, he also said the U.S. needs to increase its national savings rate -- issues that were echoed in a statement released at the close of the talks that said China is committed to continuing exchange-rate reform and the U.S. to saving more.

Mr. Bernanke had joined a delegation of senior U.S. officials led by Treasury Secretary Henry Paulson that spent two days discussing economic and trade issues with its Chinese counterparts. The much-anticipated talks ended without any breakthroughs on such thorny issues as currency policy. "We have a point of view that there's more risk in going too slowly than there is in going too fast," Mr. Paulson told reporters after meetings with President Hu Jintao and Premier Wen Jiabao Friday. "And the Chinese see that differently."

The two sides, however, said they found common ground on such broad issues as the importance of dismantling barriers to trade and investment flows. And they set up several groups charged with negotiating specific agreements in such areas as health, aviation, energy, investment and trade in services. The groups are to report their progress at the next U.S.-China conclave in Washington in May.

"For the United States and the world at large, China's development is an opportunity instead of a threat," Chinese Vice Premier Wu Yi said after the talks ended. "It serves as a propelling force behind the growth of the world economy."

But with the specter of the mushrooming U.S.-China trade imbalance hanging over the talks, Mr. Bernanke's flirtation with the term "subsidy" took on heightened political and legal significance. Many lawmakers, manufacturers and labor unions accuse China of cheating in foreign trade -- and effectively subsidizing its exporters -- by preventing the yuan from rising further and faster. A weak yuan makes American goods and services relatively expensive, and Chinese products relatively cheap.

Chinese officials say that stability in the yuan's exchange rate provides important benefits to their economy, and that they are committed to allowing market forces to play a greater role over time. The currency has increased just 5.8% against the dollar since the Chinese authorities first allowed it to move in July 2005, and Mr. Bernanke sided with those who say its value is far below what would be set by a free market.

If it concluded that China is subsidizing exports through its currency policies, the Bush administration could well be forced to take punitive measures against China at the precise moment it is undertaking a government-wide effort to improve U.S.-Chinese economic relations. The Treasury Department, for instance, would come under intense congressional pressure to declare China a currency manipulator in its semiannual foreign-exchange report. Mr. Paulson is already two months late with the next report, which was due Oct. 15.

Furthermore, the administration might find itself obliged to bring a trade case against China for violating international rules against export subsidies.

Treasury and Fed officials denied that Treasury had brought any pressure to bear on Mr. Bernanke to modify his language. "It was a spontaneous decision to enhance the clarity of that sentence," said Fed spokeswoman Michelle Smith. The Fed is fiercely protective of its independence from political Washington.

And Fed officials stood by the written version of the speech, as well as the spoken address. In both, Mr. Bernanke jumped enthusiastically on the currency bandwagon, urging China to allow the yuan to appreciate and, eventually, to move freely against other currencies. Such a move, he said, would give the Chinese greater control over their own monetary policy and would help reorient China's economy away from exports and more towards production for its huge domestic market.

Though the yuan was a central focus of the U.S.-China economic discussions this week, regulatory changes that would give foreign companies greater access to the Chinese market were also on the agenda. There were no major breakthroughs, although the two sides announced initiatives to expand economic exchanges, including plans for Nasdaq Stock Market Inc. and NYSE Group Inc., operator of the New York Stock Exchange, to expand their presence in China. (See related article.)

The joint statement also said the U.S. and China will start discussions on a possible investment agreement. Under such agreements, which the U.S. has with 39 other nations, the two parties typically agree to give foreign investors the same legal protections as domestic investors, and agree not to impose restrictions on foreign investors' operations or movement of funds into and out of the country.

The two countries also committed to restart in January negotiations aimed at increasing the number of passenger flights between the U.S. and China. Such talks had been stalled since an abortive meeting this past April. The current air agreement between U.S. and China does add new flights gradually through 2010, but there has been fierce competition among U.S. airlines for the few slots that are opening up.

"China and the U.S. have shared economic interests, and we agree on many issues," Mr. Paulson said.

By MICHAEL M. PHILLIPS and ANDREW BATSON