Many countries do peg their currency to the US Dollar. But by not allowing their currency to be internationally traded and truly "floated" on the currency markets they lose any chance at being a legitimate reserve status currency. In other words, why not just hold US Dollars? Japan, the US, and the EU have a floating currency exchange rate system. The Peoples Bank of China manages a highly regulated floating mechanism , thereby limiting its currency moves to a tight range pegged by design to the US Dollar. Again, what smokes foreign holders of Chinese debt are the strong unilateral moves by the Peoples Bank of China to devalue it's currency against the Dollar. It makes no sense at all for - let's say for example an Italian Bank to hold a 2% Chinese Note if the PBC unilaterally devalues the underlying value of your asset by 5% in a single surprise move. You've just paid the Chinese 3% for the courtesy of financing their State. As I've mentioned earlier in this thread, this is not uncommon for the Peoples Bank of China to do this and has happened in 2015 and again in 2019. One way that the PBC gets around this is to issue some debt denominated in US Dollars - which is certainly bitter for them, but it is a device of their own construct.
This thread has certainly aged well with the current Chinese debt default crisis for State Owned Enterprises.
Looked up Chinese M2 at https://fred.stlouisfed.org/series/MYAGM2CNM189N, since 2008 the Yuan has been losing on average 1.08% purchasing power per month, or nearly 13% a year. All the while their 10Y yield is at 3.27%~ https://tradingeconomics.com/bonds