“Over the past year and a half the Chinese have reduced their holdings of US treasuries by nearly 60%.”
That sounds like QE2. We bought their U.S. treasuries back with printed money. Maybe downgrade came when the Chinese felt the wet ink on the Fed banknotes.
Unfortunately, we don't know exactly what the Fed does with Quantitative Easing currency creation, they have been able to defeat Congress' demands for transparency.
Additionally I failed to note (poor math), the the Chinese sale of bonds likely went to the foreign nations that now hold more than China.
This means there is less chance that an accomplished QE currency creation has gone for US Treasury Bonds. The danger is that the Fed will do this in the future.