The Chinese economy today is, in large measure, an assembly platform for American and foreign companies to turn components designed and made elsewhere into final products, and then to export them to the rest of the world. More than 60 percent of "Chinese exports" are, in fact, the sales outside China of multinational firms operating in China.
What Apple says on the back of every iPod is true: "designed by Apple in California, assembled in China" from chips, hard drives and screens made in America, Korea and Japan. Chinese assembly adds only a tiny amount to the value of each iPod.
The iPod is not a new millennium icon because of its components. Nor does it beat the competition on price. iPods are must-have gadgets because of their elegant and simple design, a design created in Silicon Valley, with almost all the profits returning to Apple and its U.S. shareholders.
The fact that iPods are not assembled in the United States certainly costs assembly line jobs in America. But these are in the lowest tech and lowest part of the production process. Much better American jobs are created, in design, financing, marketing, logistics and distribution. This is a very positive trade-off.
The final China trade secret is that Americans have benefited from the vast quantities of dollars and Treasury bills (estimated at $750 billion) China has purchased in recent years to manage the dollar-renminbi exchange rate. China-funded credit kept U.S. interest rates low after 9/11 and the dot-com bust, fueling both consumer spending and the rapid run-up in housing prices.