With the recent stimuli and quantitative easing, countries like China are worried that their vast quantities of dollars are going to be worth less (note: not worthless). China currently owns $1.4 trillion, i.e. about one-third of all dollar denominated reserves of the world. No wonder they are terrified.
But they are the victim of their own practises. This article explains it all in a very concise fashion as follows:
But China’s real problem is that it is running a persistent current-account surplus; in order to keep the yuan closely tied to the dollar it has to keep buying more dollar assets. If China really wants to reduce its exposure to the greenback it must allow the yuan to rise. It would incur a loss on its existing reserves but stem future losses. But so long as China maintains its current exchange-rate policy, it is, ironically, helping keep the dollar dominant.
Also, here is a previous post on this very topic: Why the world cannot ditch the US$ as easily as they would like.
[CORRECTION: After posting above, I came across the latest numbers from China. They own over $2trn.]
