That "excess money" is all US dollars. When we buy stuff from China we pay in US dollars, not yuan/renminbi or gold or anything else. Since China has a trade surplus with us (and has for a long time now), that means they are sitting on a lot of "excess" US dollars. When the US devalues dollars, the US dollars China is sitting on get devalued too. If the US were only devaluing at 2% a year and China could get a 3% yield on US debt, then it's pretty obvious that China should prefer to park their long-term dollar-denominated holdings in US debt rather than US dollars. Perhaps less obvious but still true is that even if the US is devaluing dollars at 15% a year and US debt yield is only 2%, it's still better for China to sit in US debt rather than US dollars if China knows that money is going to remain an "excess" (not needed) until the debt matures (or believes US debt yields will stay about the same or go lower so they can sell their treasuries on the open market before maturity and not lose significant money in the process).
The only way China can get itself out of the way of the "US dollar devaluation bulldozer" is to get rid of its US dollar holdings by using it to buy stuff (like resources, and rights to resources, which they have been doing). And the faster the US devalues the more incentive China has to do exactly that. But there's a whole lot of other factors at play. For example, if China started dumping US debt in the market, China's own holdings of US debt and dollars might start devaluing faster and China could end up being even worse-off. And even if they don't drive the dollar down too much, buying up stuff too fast could (via simple supply+demand) drive prices up giving them a bad deal. They may also intend on using their US debt for political influence purposes (perhaps a deal that gives them Taiwan). Then there's China's dollar-peg strategy which requires them to hold lots of dollars. (They keep the yuan pegged to the dollar by a combination of printing yuan and accumulating dollars. They could do it just by printing yuan, but then they risk out-of-control devaluation of their own currency.)
The whole dollar-peg issue (which I personally think is a flawed strategy - not really in China's best interest), reminds me of the insanity everywhere else. Even the Swiss franc, which as recently as the year 2000 was still on a gold standard, is now being pegged to the Euro by the Swiss central bank -- somehow their logic is they needed to do this because the Euro's value was sinking so fast. (In my mind, that's the perfect reason not to do it. But then, I'm not a banker willing to sell out my countrymen for my own personal profit.)
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