Won't let me respond to the comment below this one, but China doesn't determine the volume of the secondary market for UST. It's mostly in New York and in London.
Right but that market's volume changes over time and China gets to choose, with in some limits, when to sell off their bonds. This gives them potentially much more leverage than a static view of the situation might imply.
Yes but they would have to sell it on a secondary market. Those only exist in New York and in London, and what our research found was that the liquidity in those markets was enough to handle a selloff. The short version is that the Chinese are limited by the markets that they are able to sell these instruments, and not vice-versa.
