chinese-american economics

unrelated to the internet, but i did realize this last night, so it may as well go down here.

i'm aware of two facts, to which we are all constantly exposed by various media:

A. the US buys lots of stuff from China, more than China buys from the US, so there's a trade imbalance. this means the Chinese are stuck with extra $$ that they can't spend, so they loan it back to the US to continue the cycle.
B. the Chinese 元 is tied, in part, to the US $$.

i knew these things already, but didn't realize they were directly related. but they are - and so far i think it's a one-way relationship, in that A) makes B) necessary. i understood it in terms of the following cycle:

1. China companies manufacture goods
2. US companies purchase China goods with $$
3. China companies purchase US goods with the $$ they accumulated
4. China companies have $$ leftover
5. China companies need to pay for domestic costs and profit, but can't spend $$ in China
6. China companies give their $$ to China govt, which gives them China 元 in exchange
7. China govt loans $$ to US treasury
8. US treasury loans $$ to US banks
9. US banks loan $$ to US companies
10. (back to 2.)

this seems to work. I don't know anything about how sustainable it is, though I think I see how you could get to know, or have a strong opinion about, something like that by looking at this process in detail.

anyways, why does A lead to B? because of 6). in order for 6) to be a fair deal, so that the China companies can know they're getting exactly their dollar's worth in the trade, the $$ and the 元 should be closely linked. in essence, those $$-linked 元 are like $$ printed in Chinese form, with the actual $$ stored away as ensured value, like gold - this is why they call $$ a reserve currency.

so apparently, this journal is entirely devoted to me figuring out things that everyone else knows already.