This article is quite a bit short of right. China doesn't need to dump US $ to stimulate internal demand. They do have to convert some into yuan to buy things that absolutely positively can only be traded in yuan. But a whole lot of other things can be purchased in dollars. This does depress the prices of dollars with respect to oil or steel or what ever is being bought but that's not nearly as inflationary as dumping the dollar for the yuan or some other currency.
Further more, if it weren't for the US, China would already be running a net deficit. That's how strong and big the internal demand is in China. That doesn't mean their economy can't overheat, but it does mean that even in a recession they would still be a BIG consumer.
And lastly China is successfully and very slowly reducing it's US dollar exposure.
"And lastly China is successfully and very slowly reducing it's US dollar exposure."
Disagreed - as the article and in other analysis points out, China has over 2 trillion in US dollars -slowly reducing or not adding to this huge pile of US dollars will have little impact on the near to mid term situation. China has alluded to reducing their treasury holdings but have not done anything thus far, IMO, it is just a leveraging tactic for negotiations - China must keep the yuan down in order to subsidize its exports without which they do not have much else driving their economy.
Further more, if it weren't for the US, China would already be running a net deficit. That's how strong and big the internal demand is in China. That doesn't mean their economy can't overheat, but it does mean that even in a recession they would still be a BIG consumer.
And lastly China is successfully and very slowly reducing it's US dollar exposure.