Harvard professor warns of currency war

Harvard professor Niall Ferguson attending the hearing argued that if the US pushes China too hard, the two sides will be on the verge, and maybe are already, in the middle of currency wars.

During the two-hour hearing, most experts said that the Chinese Yuan is indeed undervalued, and the appreciation of the Yuan will benefit both sides: warming up the US economy while cooling down the heating Chinese economy.

However, Professor Ferguson from Harvard University did not agree. He says the US should not take protectionist measures towards China since it's still in recession. He suggests the US learn from the recession in the 1930s, when trade protectionism slowed down its economic recovery. He says not only is a trade war on the verge of breaking out, but a currency war is only a hairtrigger away.

Ferguson says China is becoming the engine of the world economy, and has taken the lead in the recovery. So if the US squeezes China too much, it may snuff out the recovery, bringing a deeper crisis for the world economy.

U.S. exports to China hit about 70 billion US$in 2009 -- representing a flat growth during 2008 that analysts attribute to the global economic slowdown.

Harvard professor Niall Ferguson attending the hearing argued that if the US pushes  China too hard, the two sides will be on the verge, and maybe are already, in the  middle of currency wars.