China gets serious about selling dollars

Buried in yesterday's TIC report was this little gem.

China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury.
China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC's Chris Hogg.

That's a little disturbing, but there's a really funny punchline to this story.
Does everyone remember Geithner's comedy act in June? In case you don't:

Speaking at Peking University, Mr Geithner said: "Chinese assets are very safe."
The comment provoked loud laughter from the audience of students.

Geithner really knows how to break the ice with students. Well, it appears that the Chinese officials didn't think it was so funny.

The sales were made as the US treasury secretary was visiting Beijing to try to reassure the Chinese that their investment in his country's government debt is safe.

Would you buy a used car from Geithner? It appears China wouldn't.

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what does this mean to the dollar?

If China dumps U.S. debt, implies interest rates must rise to monetize the debt further. but, that said, I just wrote up something which implies in spite of this beyond belief increase in the monetary base/money supply, we still have deflationary pressures on the economy....

so does China trump U.S. economic conditions on the devaluation of the dollar?

I don't have any answer, I'm digging around for some.