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This problem is going to solve itself rather shortly. Although whether everyone will be happy with the result is a different matter...|
China does not need to keep buying $ to keep its currency in place. The currency is held in place due to capital controls. Westerners are not allowed to bring capital into the PRC (and thus into yuan) unless they have a permit. That is enough for that function.
The reason that China has purchased so many US Treasurys is that it has run a fairly large merchandise trade surplus for the last few years. That surplus would either need to be repatriated back to China or kept in $. Most PRC firms do a combination of both. The $ that are retained are then invested in US$ denominated assets, be they Treasurys, agency bonds (mostly Fannie Mae and Freddie Mac), corporate bonds or direct investment (property, stock). Treasurys have historically been the most popular sas they are the lowest risk, although the PRC is also believed to be the largest creditor to Fannie and Freddie.
Now it is not well known in the West, but historically China has actually not run large trade surpluses - this is in direct contrast to the so-called export oriented model of development that the ROK and Japan utilized. In fact as recently as six years ago, the PRC had no trade surplus. The outsized trade surplus of recent years can now be easily recognized as a side effect of artifically (and unsustainably) high consumer spending in developed countries, particularly the US. As those economies return to more sustainable levels of consumption, China's trade surplus will fall. By a LOT. And we've already seen it. I suggest you look at the PRC's Jan trade numbers. Run rate merch trade surplus if off by some 90% vs. year ago numbers. With these smaller trade surpluses, the question of whether to buy more Treasurys will be moot. There will simply be no need. Add to that the fact that China is now running a large gov't deficit of its own that requires funding, and it is easy to see that what little additional capital comes from the trade account will simply be utilized domestically. That is not to say that China is short of capital. China has gazillions of $ of Treasurys maturing every year for the next 30 years. But it is likely that will be rolled as the US Treasury refinances its maturing debt - it won't be available for new funding of the current gov't deficit.
It's ironic, but the scenario that some US politicians have hoped for, no demanded, namely an end to China's trade surpluses, is near. The only thing that could stop China's trade surpluses was the only thing that created it - jacked up demand from Western consumers. But now that era is drawing to a close, what replaces it is an era of reduced capital availability for everyone. It's just that the first to feel the impact will be those that are the most capital constrained. And that would be the US first and foremost.