it is not a position of weakness at all. Rather, it is a very strong position when compared to that of most other countries…BUT it is a position relative to the US.
Let me put it this way:
Would you prefer sitting on a $1T worth of oil or $1T worth of US bonds? If China does ANYTHING to weaken the US, do you think China can afford to take a 50% hit on those bonds?
Secondly and even more important than the $1T debt, is what will China do with its manufacture and labor if it cannot export to the US?
US still happens to be the Gold standard as for as China is concerned.
That is why the ONLY way for China to regain this unintended consequence of riches, is to slowly and gradually reduce their US bond holdings. If they do it too fast, they will suffer the worst. They have started doing that very slowly (last month they became the 2nd largest US bond holders, relinquishing the 1st spot to Japan).
China missed a strategic boat 2 to 5 years ago by not opening up their currency. That would have offered an alternative for a lot of countries in the event dollar and euro misfire. They did not do that and as a result what you’re seeing is the seesaw between the USD and Euro. Now it is Euros turn to slide, so guess what - USD will start going up.
China is caught in the (forex) trade winds!