I should add that what they're saying here has more to do with their domestic reform agenda than anything else.
It simply means they are not going to invest in US treasuries any more. So yield on longer term treasuries will go up. It is not going to happen in a day but it is very significant. 10 year yield can easily rise up to 4.5% within a few months.
Chinese government have no religion and their practical god is two things: money and the stick. The US has the biggest stick, and the chinese government hoard money because they worship it. So as long as the US has the biggest stick, and the chinese government worship money, the chinese government will continue to hoard money. The chinese government most likely knows about General Douglas MacArthur. "General of the Army Douglas MacArthur was an American general and field marshal of the Philippine Army who was Chief of Staff of the United States Army during the 1930s and played a prominent role in the Pacific theater during World War II." If the great General was with us today, I would not be surprised if he were to have said something like: "The Chinese government wishes us to show them an act of God. Let the Japanese Government give us one of their small islands so that God may reveal one of his less powerful acts in front of their eyes: the sinking of the island."
The chinese government has acknowledged they have a lot of money. The US should back any action at the criminal court to get compensation for the chinese muslim minority who were brutally tortured and ethnically cleansed by the chinese government. They were denied every basic right, and were removed from their lands, and their oil was stolen. Even their kids were tortured. A little innocent boy is tortured -- heart breaking: <iframe width="420" height="315" src="//www.youtube.com/embed/fni1D4TvH4o" frameborder="0" allowfullscreen></iframe>
NYT is reporting that Japan and US are flying jets in south east china sea. The chinese government could now see the sticks in the air. God is revealing himself to the chinese's government. In above post it was mentioned that chinese government was doing the talk from some other reason. They think the world is stupid. This thread figured them out before even events came out.