This particular passage is interesting to note:
The trouble is that the Chinese clearly feel they have enough U.S. government bonds. Their great anxiety is that the Obama administration's very lax fiscal policy, plus the Federal Reserve's policy of quantitative easing (in layman's terms, printing money), are going to cause one or both of two things to happen: the price of U.S. bonds could fall and/or the purchasing power of the dollar could fall. Either way the Chinese lose. Their current strategy is to shift their purchases to the short end of the yield curve, buying Treasury bills instead of 10-year bonds. But that doesn't address the currency risk. In a best-selling book titled Currency Wars, Chinese economist Song Hongbing warned that the United States has a bad habit of stiffing its creditors by letting the dollar slide. This, he points out, is what happened to the Japanese in the 1980s. First their currency strengthened against the dollar. Then their economy tanked.If only this tectonic shift of maturity swapping was true. TIC data (linked on this page) does not support this and shows either steady or slightly falling purchases of U.S. maturities by foreign concerns all across the curve. China has not done anything remotely like revoking the U.S. credit card. And, let us recall that the current account deficit is NOT "Financed" by foreign purchasers of U.S. dollar denominated securities. That is a remnant of the gold standard and is not applicable. The U.S. spends then taxes...it does NOT need to "get" dollars from Chinese or anyone else in order to deficit spend.
And the "going out strategy" reminds me of another Asian economy buying up real foreign assets such 10% appreciation to infinity golf courses...until those prices crashed as well. A heavily imabalanced fighter will typically lose to a well-rounded opponent, and the Paper Dragon has looked top-heavy for a long time.