Although this effect, too, is plausible, research suggests that its importance should not be exaggerated. If China were truly exporting deflation, the effect should be evident primarily in the behavior of import prices.
Research at the Federal Reserve Board by Kamin, Marazzi, and Schindler (2006) estimates that purchases of manufactures from China have lowered U.S. import price inflation roughly 1 percentage point annually over the past decade, a decline that has led to a short-run lowering of consumer price inflation of about one-tenth of 1 percentage point and a somewhat larger effect over the longer term.