[Girchuck]

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China can hurt US plenty if they get desperate and scared that US will not stop attacking their suppliers.
China can stop buying US treasury obligations, and start dumping their considerable dollar stockpiles, precipitating financial panic and dollar crash.

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<Slapping forehead and shaking head in disbelief of what I just read>
I'm surprised so many people buy into this fantasy scenario... This is like someone saying they will cause the collapse of the gold market by selling all their gold at $1 an ounce. Please do. I will happily buy their discounted gold and grow rich in the process. The laws of economics are like the laws of physics. If the Chi-Coms want to slit their own throats economically then I for one will be quite happy because I consider the Chi-Coms to be an enemy of the USA...

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They will not do it ordinarily, because that would hurt them too, but if their suppliers are attacked, they might decide that US may not be allowed to cross the line without severe economic consequences. Bombing Iran may be that line.

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China has more to lose from alienating the USA than the USA has from alienating the Chi-Coms. Lucky for China, the USA usually elects presidents who a check/fold and check/call (Bush raises w/ AA then he checks it down to the river). Eventually we will get another Reagan to clean up their mess...

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But China will not sell its dollars cheap like that. It will simply start selling them at the Forex going rate. When supply of dollars will increase, dollar will go down relative to other currencies and precious metals into which China will presumably diversify. This is simple economics ofcourse. Other countries, whose central banks also hold a lot of dollars will see dollar going down and might panic and rush for the exit, precipitating a crash in dollar.
I see nothing fantastic in this scenario. American banks will be powerless to buy hundreds of billions of dollars that China holds, Federal government is currently running a huge deficit, financed mostly by foreign based entities, and our debt obligations are considerable. Surely you can see that dollar sell-off might hurt our ability to import cheap crap from China, and ruin our economy driven by consumer spending.
Continuing your poker analogy, China may or may not be able to afford to go all-in, but the US certainly lacks the will to do so. A move by China that will send our economy into recession will cost current administration dearly, and piss off a lot of powerful people.
War is not always good for business.

And I concede that China may lose even more from this move, yet some actions of US may be so strategically intolerable for China, that it will be willing to absorb the pain to make us stop.