American literature is "massively overrated", the award-winning author and film-maker Xiaolu Guo told the Jaipur literature festival – and fellow panellist and US novelist Jonathan Franzen – this weekend.

A session on the global novel in Jaipur on Saturday saw the Chinese/British writer Guo, one of Granta's best of young British novelists who has also been shortlisted for the Orange prize, attack the way "our reading habit has totally been transformed by the mainstream".

"Our reading habit has been stolen and changed" said Guo. "For example I think Asian literature is much less narrative … but our reading habit is more Anglo-Saxon, more American … Nowadays all this narrative [literature is] very similar, it's so realism, so story-telling driven … so all the poetry, all the alternative things, have been pushed away by mainstream society."

"I love your work, Jonathan," she told Franzen, "but in a way you are smeared by English American literature … I think certain American literature is overrated, massively overrated, and I really hate to read them," she said.

The Pulitzer-winning Indian/American Jhumpa Lahiri also laid into America's literary culture, saying that it was "shameful the lack of translation, the lack of energy put into translation in the American market". "It is embarrassing, to me, and I think just getting out of America for a little while makes you much more conscious of that," said Lahiri, who currently lives in Italy and has not read anything in English for the last two years.

"I was looking at [an Italian paper's] 10 best books of the year, and they chose seven books written in English. This was astonishing to me," she said. "I can't imagine the New York Times ever choosing seven books written in a language other than English as their choices."

Lahiri found the focus on English "distressing … because it has a certain power and a certain readership and a certain commercial currency now", and she feels "there is so much literature that needs to be brought forward, and the danger now is that it's getting even less exposure".

Guo, who writes in both Chinese and English, agreed. "The alternative needs to be much more powerful, much more money put in to raise that platform, and then you can read on an equal platform, without such unequal competition," she said.

"If you write in Japanese or Vietnamese or Portuguese you have to wait … to be translated, and translated literature never really works immediately as English literature unless it wins the Nobel or some big prize," Guo said. "In a way the easiest and laziest way is to write in English. What a struggle to write in any other language than English. "

"I'm saying language is a passport. A dubious, dangerous passport too," said Guo.

Franzen had previously told the Jaipur audience that "in my lifetime so much of American culture has been exported in the form of technology, in the form of television, in the form of a consumer way of life, that things that I'm writing about purely from up close start having this weird applicability very far away".

The author of The Corrections is also concerned, he said, about the "homogenisation of global culture". "That kind of experience, [that] 'wow, Achebe has shown me something about Africa' … my worry as a reader is that becomes almost a nostalgic experience, the very idea of cultural difference."

Statistics from 2007 show that about 2% of books published in the UK and US are translations, as opposed to Germany (13%), France (27%), Spain (28%), Turkey (40%) and Slovenia (70%). In 2008, Nobel prize for literature judge Horace Engdahl told an interviewer that American writers were "too isolated, too insular". Americans "don't translate enough and don't really participate in the big dialogue of literature," Engdahl said at the time. "That ignorance is restraining."

Lahiri believes that "translation is the key" – that it is what has created "the bridge for so many of us to be able to read across our limitation" – but Franzen wasn't so sure.

"One of the consequences of globalism, it seems to me, and I think we see it even in the literary world, is that things become less horizontal and more vertical," he said. "If you can imagine everything perfectly translated, that we have massive subsidies for translation, that anyone publishing in Romanian in Romania, that is instantly available in all languages everywhere, you are still faced with the finite amount of reading time that an individual reader has … in a funny way you'd think there'd be greater diversity in what is read, but I worry that the trend in a more global literary marketplace is even more towards a kind of star system and a vast sea of people who can't find an audience."