China is not getting rid of its dollars. They abandon the banks and set up a new financial system.

China runs huge trade surpluses with North America and Europe. These markets pay in US dollars or euros. Every day, China earns around $2.7 billion and around €500 million in trade surpluses from these regions.

Generally, a country reinvests these trade surpluses in investments in these same countries. In economics, this is called the balance of payments. But China does not do this. Instead, they are withdrawing these excess dollars and euros from Western banks to capitalize a new banking system.

China ordered its Belgian custodian to liquidate 53 billion of U.S. government and agency paper in the first quarter, and these measures almost certainly led to significant trading losses. Interest rates are much higher today than when China bought the bonds, so any secondary market sales would reflect higher yields and lower market prices. The fact that they are willing to accept heavy losses on such a huge bond portfolio demonstrates the strong urgency to move assets out of Europe as quickly as possible, and to move out of bond debt and into bonds as quickly as possible. more liquid instruments.

Many countries are keen to establish and use a new financial system, a network of banks completely outside of SWIFT and the risk of surveillance and sanctions from Western governments. To capitalize such a system, large reserves of dollars and euros will be needed to create markets and finance trade settlements.

Additionally, the dollar and euro that are now in Chinese banks, in China, can be used to secure new loans in any currency and create new economic growth elsewhere.

Resources and links:

Infographic, Visualizing China's trading partners
https://www.visualcapitalist.com/cp/china-trade-partners/

China's $53.3 billion divestment in U.S. Treasuries signals massive shift in dollar assets
https://news.bitcoin.com/chinas-53-3b-divestment-in-us-treasuries-signals-massive-shift-from-dollar-assets/

China sells record amount of US debt amid signs of diversification
https://www.bloomberg.com/news/articles/2024-05-16/china-sells-record-sum-of-us-debt-amid-signs-of-diversification

US Treasury assets in China becoming 'hostages,' academic warns
https://www.bloomberg.com/news/articles/2024-04-29/china-s-us-assets-becoming-hostages-divestment-advocate-says

China says Europe's rising trade deficit is its fault
https://www.bloomberg.com/news/articles/2023-08-08/china-says-europe-s-soaring-trade-deficit-is-its-own-fault

China's trade surplus hits new record
https://prosperousamerica.org/china-trade-surplus-hits-new-record/

Hong Kong competes with the United States in Bitcoin
https://www.bloomberg.com/news/articles/2024-04-29/hong-kong-debuts-spot-bitcoin-btc-ether-eth-etfs-in-crypto-hub-bet

Crypto Hub with Landmark Bitcoin and Ether ETF Approvals
https://www.trackinsight.com/en/etf-news/hong-kong-emerges-as-crypto-hub-with-landmark-bitcoin-and-ether-etf-approvals

How do banks create money
https://www.quora.com/If-banks-create-money-then-why-do-governments-borrow-international-loans-to-fund-development-projects