The right view of China trade

Many pundits talk about China being the factory of the world. This is misleading. China might be more accurately thought of as the assembler of the world. While last year it was the world’s biggest exporter, it was also one of the world's biggest importers.

- Marc Chandler, Brown Brothers

This characterization that China is a the great assembler is a good description of China. Their margins are low and much of their business is through outsourcing from US retail firms. The assembler view means that the raising of exchange rates will have uncertain effects. Exports prices will go up but import prices will decline. The normal effects will be less pronounced. Hence it is not clear what will be the change in trade flows.