Nilgiri
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If they dump dollars, wouldn't that raise their currency visa vis dollar? Isn't it counter productive to their export economy?
Bingo. All bets are off (even if they found buyers for these instruments this year or even next year for sake of argument) once you open that floodgate (of artificial low CNY).
It was the main reason to build up this stockpile in first place. Think of it as a grand subsidy towards Chinese employment.
I'm not sure the US can just "cancel" a range of US Dollars just because they're held by China, which is said to be over $3 TRILLION. This is a fiat currency we're talking about with nothing tangible to back it up (e.g. no gold, silver, diamonds, oil, etc.) If the US pulls something like that the USD would become completely worthless overnight and Americans would set the Fed building on fire.
The US sure can. These are also T-bonds rather than dollars directly (given China wanted to leverage on it and gain a better return). If it was cash, the task would be near impossible. But T-bonds are specific in this regard as they are large store value and carry paperwork for transfer.
The US would need to coordinate with ECB, BoJ and other large world banks to get a good strike rate (if want to improve further past its own ledger on what it sold to Chinese), but nothing really stopping it if it wants to do this move.
As for it being worthless fiat currency, well more importantly its worthless fiat currency China saw the need to buy into (asking is it really so worthless if everyone buys into it and trusts the "institutional/soft" backing)....and even gain a clear decades long policy+development result out of it.
China after all simply could have bought 0 of it and let its currency appreciate more naturally and have a much smaller stockpile (and thus liability for situation such as this one). China made this decision, no oen forced it to, so it (USD) can't be all that worthless a currency indeed....back then or now.