Juan buys bonds

Currency is traded on the foreign exchange market called the Forex. The Chinese Central Bank prints up Juan and uses that to buy dollars on the open market. This drives up the cost of the dollar and lowers the cost of Juan and this gives China an advantage in trade which leads to a favorable balance of trade for China and an unfavorable balance of trade for the US. In doing this China accumulates a large supply of dollars and when the US government wants to borrow money the Fed sells bonds and China using their supply of dollars buys US bonds. In this process China becomes a major buyer and this helps the Fed to sell bonds at a lower interest rate which saves the government a lot of money. The more buyers there are the lower the rate on the bonds. This lower rate effects not just government bonds but other interest rates like home mortgage loans. In addition the price of goods made in China and shipped here are lower for US consumers. While all of this seems like a win the down side is that the blue collar workers have traded their good jobs for low cost TV's at Walmart.