They can't really buy yuan since it doesn't freely trade. I guess they can use the money to buy back debt dominated in yuan. I am not sure who owns the yuan denominated debt or if it is even purchased outside of China. They can't buy the Euro because it is going down the tubes. No advantage to buying commodities, oil because that just drives up their cost of manufacturing. Their best route is to keep putting money into treasuries to support the dollar. A strong dollar is in their best interest since most all of their production ends up being in one huge supply chain ending up in the US. If they do anything to hurt the US economy then they are the ones that will take beating and in China, unlike western democracies, their is no real system there. Its ran like a criminal organization. No laws. If their economy collapses then they will be ripe for a change in government and then the ones in power could lose everything.
The consequence of China refusing to buy more US government debt, or dumping existing debt, is that the USA can no longer import stuff from overseas. This would cause very strong inflation domestically, as virtually everything you buy, ranging from oil to basically everything in Wal-Mart, is imported. The strong inflation would continue unabated until such a time that the USA rebuilds its industrial production to produce enough exportable goods to facilitate imports, *or* Americans reduce their consumption of imported goods such that existing exporters could export enough to at least eliminate the trade deficit. IMHO, China dumping US treasury debt (or at least their discontinuation of new purchases) is a stock-market positive, bond-market catastrophic event, and we're in the early innings of this part of the cycle.
Its a little more complicated than that. A REIT would typically have two kinds of debt; secured debt, ie: debt that is directly secured against the real estate itself, and unsecured debt, ie: pledges against the company itself but not the property. They are *not* repurchasing the secured debt for 30 cents on the dollar -- but they may very well be able to purchase the unsecured debt, which is a form of senior equity essentially, for 30 cents on the dollar. All equity in those companies is essentially worthless anyways. And where are these Real Estate companies getting the cash to do that from anyways?? Bonds of companies that have good cash resources are not trading down.
First move is to distance their currency from the dollar, have it no longer peged to the dollar. Such a move is taking place now. Second, they would have to sell their debt, dump it on open market for less than what they paid.....US can buy back the debt at a cheaper rate, as will other Euro nations. (US is in far better shape than Greece and the rest in Euro-Land and will be a flight to safty for the smart money, even during this depression.) This talk of "China" destorying the US is a joke. It is for fools to believe. Third, Huge Tarrif's on Imports from China, as the US consumers buy a boat load of China goods. Fourth. Walmarts, and so forth will take a huge hit, massive lay offs in the "Cheap" store employment. Fifth, Tariff's on US goods to CHINA....which would hurt Ford and a few others. Overall outcome.....PAIN for America and the consumer. However, we would survive and the consumer would learn to handle their money better. Manufacturing base in the US would grew as We would have to Manufacture back here in the USA.. CHINA would impload....and be forced back to pegging the dollar and making friends again. War...NO.
Nuclear war. We can send the new Peacekeepers with the new 12MIRV-3a package (100megaton yield nominal, 2 decoys in the package with countermeasures) and destroy the entire country of china in 30 minutes.
That's horrendous to even speak of that. That's sick. Nukes have no use. Watch some videos on the aftermath of nuking japan. It's not worth destroying so many humans, to protect a monetary or government system, that is pointless in terms of time. I don't currently support the dollar based system. It has not provided true value for americans. It only benefits conglomerates, large banks, and hedge funds....on top of that, it has allowed the US government to get out of control with endless spending ability.