Beating a Dead Tibetan 2: the Remetaphorizing!

Sorry to sweat-shop-belabor this--I'm sure we're all sick of discussing just where China falls on the Economic Boogy-man Index (76 as of yesterday)--but just to go back to point I was talking about earlier...
I mentioned an article/blog I read a few days ago which claimed that the current demand for treasury bills from China will likely begin to wane as their exports drop off. As demand falls for Chinese goods (and therefore Chinese RMB), so the argument goes, there is less upward pressure on the Chinese currency and therefore less need for the Chinese government to intervene directly into American financial markets to keep the peg...well, pegged. In his own words:

China no longer needs to be as active to keep the yuan (which now appears to be back to a hard peg) where China wants it to be. A presumably smaller current account surplus and a capital exodus would seem to be prime suspects. (Link)

Tonight, the BBC is running a headline: "China's Exports in Record Decline".
Bad news for China certainly, but not necessarily a vindication of the argument above. Scroll down on the BBC article and you will eventually find that

December imports fell even more sharply, declining 21.3%, the China Daily reported.

That was a bigger decline than November's 17.9% drop.

With exports in December worth $111.2 billion, and imports worth $72.2 billion, that made December's trade surplus $39 billion.
That is the country's second highest trade surplus ever, just short of November's record $40.1 billion. (Link)

Quothe Captain Obvious: China's economic growth has largely been driven by exports. Imports, otherwise considered exogenous (i.e. not at all related) to exports, are a function of overall demand within the economy. But for China, where overall demand is disproportionally accounted for by foreign demand through exports, a drop off in exports will necessarily lead perhaps not an equal, but proportionate decline in imports. This isn't just an issue of exports => aggregate demand => imports (if you'd like additional sophisticated diagrams, I'm available for any class or business presentations). Most of Chinese exports are "re-exports": raw materials are imported and assembled cheaply for export or sophisticated technological equipment is imported and, again, assembled cheaply for export. Therefore, imports aren't just a function of exports in an indirect sense (see elaborate illustration above), but literally make up the exports. As an aside, contrast this with the United States. If everyone were to hypothetically stop buying American stuff (see: past 10-35 years), that wouldn't stop all us good ol' boys and gals from buying everyone else's stuff because our economy is more "dynamic": the Camerro that is American economic progress also runs on domestic consumption, investment, government spending and, more recently, the tears of unicorns imprissoned in the sea by Alan Greenspan.
Back to China, as the article points out, in December the fall in imports was even larger than that of exports. I don't know if that is accounted for by an actual decline in quantity imported vs. exported or by a change in currency values between one of China trading partners. Whatever the case and whether that will continue to be the trend (or whether there will be a trend at all) is secondary to the point that, because China's very economic soul predisposes it such that a drop off in exports will entail some degree of declining imports, at least in the short-term, the global recession will not fundamentally alleviate the upward pressure on that country's currency.
I should point out however that currency values are not solely (and in many cases primarily) determined by current account fluctuations (exports and imports), but by capital markets.
And everyone knows how predictable capital markets are.