Holding $3 Trillion in boring American gov securities seems like a safe way to shelter itself from price fluctuations if the FED decides to play with the interest rates.
I can't tell if you are being sarcastic or not, but I'll bite. Price fluctuations are of huge importance to the Chinese. They gave the US lots of labor and their domestic savings in exchange for US treasuries. Now those US pieces of paper buy a lot less of the things chinese people need (oil, food, raw materials, etc.) than when they generated those savings.
China should have never bought as many treasuries as they did. They should have bought harder assets, like oil company equites, timber and farm land, mining equities. When they tried to buy an oil company, congress blocked them. There is still no reason they shouldn't have bought diversified assets.
Providing cheap financing for US government during the 2000's, was neither good for the US, nor for China. The US got an asset bubble exacerbated by the cheap money, and the Chinese now have dollars that buy 1/2 as much as the dollars they used to buy the treasuries.
Ok, so your overall point is that "Chinese now have dollars that buy 1/2 as much as the dollars they used to buy the treasuries". But isn't this due to inflation and the dollar becoming devalued due to sub-prime disaster and overall global loss of faith in the US economy? Having the $3trillion in US gov securities is still good because it still shelters it from price fluctuations. So the cost of things made in China will still be cheap and US/Europe will still import them. If the $3 trill had been invested in harder assets as you suggests, the Chinese would have made a nice profit yes, but it doesnt safe-guard its import/export industry.
China should have never bought as many treasuries as they did. They should have bought harder assets, like oil company equites, timber and farm land, mining equities. When they tried to buy an oil company, congress blocked them. There is still no reason they shouldn't have bought diversified assets.
Providing cheap financing for US government during the 2000's, was neither good for the US, nor for China. The US got an asset bubble exacerbated by the cheap money, and the Chinese now have dollars that buy 1/2 as much as the dollars they used to buy the treasuries.