If China has been trying to weaken the dollar, they haven’t really been very effective.
The dollar by any measure is quite strong — too strong in fact for US exporters over the long-term.
The dollar is off its peak from last fall (a peak that if sustained would have been globally destabilizing) but by any reasonably measure it is still very strong
see the BIS index
the CNY is increasingly being used in Russian trade settlement — but that hasn’t translated into a strong CNY or a weak USD (far from it).
Rather it is a predictable result of sanctions that made the EUR unattractive for settling Russian trade.
And China is now at least signaling that it doesn’t want further yuan weakness + perhaps is using the state banks to do backdoor intervention to support the yuan.
Don’t see how that in any way threatens the US tho. A really weak yuan is a much bigger threat to US industry
Finally, there is way too much focus on the slide in China’s visible holdings of Treasuries.
The United States’ own data (TIC data valuation adjusted by the Fed) shows that this was mostly just a shift into higher yielding Agencies.
and it is reasonable to infer from past correlations between Chinese reserves and changes in Belgium’s custodial holdings (euroclear) that China uses a Belgian custodian for a portion of its Treasuries.
Japanese banks and the MoF really did sell a lot of Treasuries over the last 18ms (as hedging costs rose and Japan intervened in the fx market last fall). China not so much.
Finally, as noted in my interview with @bobdavis187, China has been holding its Treasury portfolio (counting Belgium) more or less constant for a long time now. It shifted toward using its reserves to fund the belt and road. China is now pretty small v the overall market.
A more or less constant portfolio has fallen as a share of US GDP – China’s Treasury holdings broadly defined are dwarfed by the Fed and only now chalk in at around 5% of US GDP.
China’s holdings fallen fallen enormously relative to the overall treasury market …
We in the US should worry about our dependence on China for certain goods that are critical to our economy — but we don’t really need to worry about financial dependence on China at this stage …
China could cause trouble if it really sold for a brief period of time. But the precedent from early 2020 (when official sales contributed to a broad disruption of the Treasury market) matters here —
If Chinese sales impeded US monetary policy transmission (and caused a steepening of the US yield curve that worked against US monetary policy goals) the Fed knows what to do …
So my sense is that the national security world spends a bit too much time worrying about the threat posed by Chinese sales of treasuries, and not enough time worrying about the threat to the industrial base (including the defense industrial base) posed by a weak yuan …