Yuan: Under or overvalued?

NEW YORK (CNNMoney) -- The yuan could be undervalued by as much as 35%. Or it actually could be overvalued.

In interviews with CNNMoney this week, two prominent experts saw both sides of the coin.

Critics have long accused China of keeping its currency artificially low, making its exports cheaper and more competitive against foreign competitors. And as all eyes look to a key meeting between Chinese President Hu Jintao and U.S. President Barack Obama this week, the accusations have reached fever pitch.

On Monday, Senate Democrats introduced a bill that would impose penalties on nations that manipulate their currencies -- particularly China. American businesses too are concerned about leveling the international playing field.

Economist Fred Bergsten of the Peterson Institute told CNNMoney's Poppy Harlow that by his calculations, the yuan is probably 25% to 35% lower than it should be against the U.S. dollar.

The yuan has risen 3% against the dollar since June, when the Chinese first promised to ease controls on the currency. But over the same time period, Bergsten points out, "the dollar has gone down against everything else."

"Over the last 3 months, the Chinese have been intervening in the currency market to keep their currency from going up more, by about twice as much as they ever did before," he said.

Before the latest economic crisis, Bergsten noted, the yuan was allowed to appreciate more rapidly, rising 20% against the dollar between mid 2005 thru mid 2008.

But in the aftermath of the recession, the Chinese government kept the value of the yuan pegged to the U.S. dollar, instead of allowing its currency to float freely in exchange markets.

In June, China said it would increase the yuan's "flexibility" in response to the recovering global economy. While the move was welcomed by global investors, American leaders soon pushed for more.

Meanwhile, a completely separate -- albeit smaller -- camp argues that a weak yuan is not the problem.

"I don't think the yuan is terrifically undervalued," hedge fund manager Jim Chanos told CNNMoney. "In fact, I think it might be overvalued."

Chanos, famous for predicting Enron's demise and known for his contrarian views, thinks China's currency is overvalued because the country is in the midst of a brewing real estate bubble that could topple the world economy when it bursts.

And he has consistently argued that it's the frothy housing market, and not a weak currency, that is the major concern in China. Afterall, trade only accounts for about 5% of the country's economy, he said.

The real problem is "China is one big construction site," with construction making up more than 60% of its gross domestic product, he said, "and that's what's driving the economy."

With that kind of growth in real estate, credit in China is growing at a pace of 25% to 35% a year, about three times as fast as its overall economy. That's a sure sign of both a credit bubble and real estate bubble, Chanos said.

"The whole world thinks it's undervalued and everybody's positioned for it to be undervalued," he said. "Usually, when everybody is positioned one way, on one side of the boat, you might want to explore the other side."