Just read a post at Broken Symmetry called Famous Last Words.
This is a typical doom-and-gloom piece about how China will overtake the US in x years with its GDP growth or, in this case, its reserve (growth implied) as evidence.
I just don't buy it anymore. China's $2.2 Trillion in reserves could, with multiplier effects, have meant $6.6 Trillion for China's citizens - or about $6600 per person, almost 43 times the poverty level.
Instead we are supposed to worry that China... could do exactly that some day in the future? Except that we just learned a very painful and obvious lesson - if you start selling debt in bulk, the market price of that debt plummets. I have no idea what the price of US Treasuries would tumble to if China tried to sell off its debt in short order, but I would not be surprised if $2.2 Trillion turned into $1.5 Trillion quite quickly (remember, there are only $833 Billion in existence as of today).
The only real reason I can see for the current Chinese policy is one that is domestically focused. Specifically, my guess is that the Chinese don't want China to turn into a liberal democracy (there are already signs that it is moving in that direction). The Chinese are probably afraid that a wealthy populace will start demanding things like right and equal treatment under the law... and before you know it, they'll be Canada. So instead, China is sucking the country dry to subsidize their manufacturing sector and relying on US demand to fuel their supply.
Which means that the growth China has had is Chinese manufacturers taking over the US and European markets, but they simply can't grow faster than the US and Europe after a while, because there is little organic Chinese demand for goods, do to Chinese poverty.
I'd love to hear a plausible alternative explanation, but so far, that's the only one that makes sense to me.