China's Dilemma

China's peg with the US is now a problem for them as the Euro sinks. $1.25 is an important support line, as is $1.16. What happens to China's export machine and margin structure as their biggest trading partner's currency loses buying power? Are they are moving towards a trade deficit? What would be the impact on US treasuries and the dollar? Surely China would be less interested in currency appreciation. The China/US relationship looks to be getting more complicated.