On the economic relation between US and China

Anybody who care to follow news should have a sense that the US has been running a huge current account deficit for sometime. And because China, as the final stop of the assembly line in Asia, runs the highest surplus; most politicians are pointing finger at the Chinese, specifically China's fixed rate exchange regime which led to an undervalue RMB.
For the past decade or so, US ship dollar bills oversea in exchange for Chinese products. Under a free float exchange regime, this should cause the USD/RMB exchange rate to fall hence dampening US demand for Chinese products. But the People's Bank of China, following a fixed rate policy, intervene in the market to sell RMB and buy dollar (they either print those RMB or issue RMB denominated
bond). As a result, the People's Bank of China has a lot of dollar in their safety box (figuratively) what economist called the FX reserve. Since we all know that it's stupid to keep cash, the PBOC decided they must put it in good use. As a prudent investor, they decided that they should put most of the money in US treasury, low interest but low risk (just like when you put most of your saving in CD if you risk averse). The huge inflow into treasury dampen US interest rate, further supporting US demand for Chinese products, causing trade deficit that ultimately brings more dollar to China. Many people, politicians and economists alike, worry that this vicious cycle could cause catastrophic economic trouble for the US down the road. This article beg to differ.
Most people worry that China could one day dump their dollar and dollar related asset in the open market thus causing economic Armageddon to the US. However, this is highly unlikely, in fact unimaginable. Such action will cause huge mutual loss on both side. And the Chinese probably build their FX reserve as rainy day fund for themselves rather than as a threat to the US.
Let's assume for some unforeseeable reason, China does decide to get out of all US dollar related asset. This could cause a spike in US interest rate, but the Fed can just come out and buy all whatever asset the Chinese are dump by printing a lot of US dollar, thus still maintaining a lower interest rate. Of course, such an action will cause the US currency to fell off a cliff. Now here's the thing, how low can US currency go? European policy makers start to feel uneasy when the Euro went above $1.50, will they see it go through $2.00? The Japanese may be able to take USD/JPY at 80, will they tolerate if it go below that very much? Hence, it is unlikely that the US dollar will fell heavily against it's major industrialize partners because those trading partners cannot stand a huge loss in competitiveness. So China with a lot of dollar bills at hand, what can they do? Option 1, The Chinese can't go buy Euro and Jpy since European and Japanese authority cannot see their currency rising rapidly against the dollar. Such action just exchange the US paper to European and Japanese paper. It does them no good. Option 2, buy a lot of RMB to get it appreciate against dollar. This will cause immediate loss on the book (remember the PBOC issue RMB bond to buy US Bond when usd/rmb is between around 7-8 rmb, now their asset is depreciated and liability appreciates). A sudden revaluation would also damage export, leading to job loss. So option 2 is probably not in the card. Option 3, buying US lands and companies? Probably not, because the US politicians cannot see crucial industry or vast amount of land go to Chinese hand. Option 4, go snap up all the raw materials around the world, boost up the price of every commodity. This could perhaps cause US to be miserable, but it benefits the commodity producer rather than China.
Conclusion, there is just isn't motive for Chinese to damp dollar. In fact, this is probably not the motive of the Chinese for accumulating FX reserves. The Chinese has only started to grow in the last decade of last century, while the US was industrialize since the beginning of last century and toward the end. Moreover, China has more than 1.3 billion people living in a land that is not much bigger than the US. I think it's better to consider China and US as two different family. One family is richer, and has work hard for a century. At the same time, the other has been poor due to domestic problems and robbery. As a result, the poorer family starts to work extremely hard when their problems are settled. They are willing to work at a much cheaper wage than the richer. The richer family, after a century of working, has accumulated good amount of wealth. They decided to take a break and let the poorer family do the hard work. So even though the richer family is making much less money in recent years and spending a lot of money, they are not necessary in a bad position because a century of hard work has more or less accumulate some good wealth. While for the poorer family, the shadow of the past is still there, they will continue to save and work until they feel they have save enough. And when that time come, they will let the richer family take some of their works.