Does China need US demand? Why is China not letting its Yuan go up?

Here's a 2nd post in a day, a continuation of the previous post. Seems like there's a word limit on blogger posts.

The Chinese need not sell to the US. The issue is not with demand, but rather, supply. And the Chinese has no problem with supply. Demand need not be stimulated. Anyone will desire a big house, a big car, a plasma TV, good food, a private jet, and the likes! If the USD falls in value and they stop buying from the Chinese, the Chinese can now consume their own goods.

Why is China not letting its Yuan go up?

People say that China is doing this so that it will give their exporters an edge. A lower Yuan means that the Chinese goods are cheaper and more competitive in the global market. Also, the Chinese may need some time to develop their own domestic market, so that they will be less reliant on exports to the US. But maybe this is just half the story.

I guess maybe the Chinese are just buying time to get rid of their USD bonds, the $800billion in USD that they hold. If the Chinese let the Yuan appreciate now, it will mean that the USD drop a lot. It will mean that 1/3 of their reserves get wiped out. And it will mean the Chinese lose a lot of money. If you have been immunised to this sort of figure, here's something to put things into perspective: the US took 200 years to build up its monetary base to $800billion!

I think the Chinese knows that the USD only has one direction to go, and that is downwards. So the faster they sell away all their US debts, the faster they let their currency appreciate, the better it will be. But they are delaying this, maybe because of lack of political guts, or perhaps they are just buying some time for themselves first.