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Chinese buying of American debt is what is keeping the dollar artificially strong compared to the Chinese currency.

The minute China stops buying American debt , their currency exchange rate will double, killing their export business to the US.

This could be a bit problematic because the entire Chinese economy is dependent upon exports to the US to keep their economy, which is a mile wide but an inch deep, going at it’s current. pace.

Any exchange rate spike against the dollar will implode the Chinese economy and the only thing preventing such a spike is massive Chinese purchase of American debt.

It is not so easy for China to reduce the treasuries they buy from us, even though they want to. This is because of the trade deficit. In exchange for dollars, the US buys stuff made in China. The companies then take the dollars and buy US treasuries. So the balance of treasuries is directly dependent on the deficit. If they start using dollars to buy things from us, they don't need to buy treasuries.

They do know this, and are increasing their purchase of assets here, especially real estate.