Justin Lahart writes well; I stole the "feeding the hand that bites you" line from him.  It is a good one.

The US tells China (oops, CNOOC) that it cannot buy Unocal, even though Unocal's energy assets were primarily in Asia and Chinese firms have far fewer overseas assets than American firms.   China responds by ... purchasing just as much US debt as before.

In January, China increased its Treasury holdings by $5.9 billion or so, its holdings of Agencies by $3.4b, and its holdings US corporate bonds by $2.7b - for a total of nearly $12b.    Feeding the hand that bites you.

The US criticizes China's exchange rate regime.   China gets annoyed that another country wants to tell it what to do with its exchange rate regime.  But private investors start to think that China just might let the RMB move a bit faster, so money starts to flow into China.    China has to intervene more heavily in the market, buys more dollars, and ultimately, buys more Treasury bonds.    Feeding the hand that bites you.

We don't yet know how many dollars China bought in January, but judging from the TIC data, it was not a small sum.       The US needs about $80b a month to finance its current account deficit ($70b for its trade deficit).   That can come from the world's banks, from foreign direct investment (in excess of US investment abroad) or from the sale of long-term debt and US equities.   Recently, it has come from the sale of long-term debt.  

And in January, net proceeds from the sale of debt (and equities) to private investors abroad fell well short of the sums needed to finance the US deficit.   Fortunately, central banks stepped up their purchases - helping to fill the hole.  

So who is doing the buying?  China for sure.  Brazil too.   They bought dollars in January to offset all the foreign hot money chasing yield in Brazil. 

But also Dubai's sheik.    Abu Dhabi's investment authority (Abu Dhabi is another of the emirates).  Kuwait's investment authority.    And the central banks of Russia and Saudi Arabia.  OPEC increased its Treasury holdings by $11 billion in January.