Liu He, sir, please, pretty please....convince your bosses to stop selling our fabulous and absolutely safe US Treasuries but buy more....
Well, the thing the west often gets wrong or maybe willfully doesn't want to understand is that power isn't in having money but in having capabilities. Money is only useful when you can put it in rotation and get back meaningful results.
China buying US Treasuries is putting the money in rotation, letting civilian actors in China grow because they're improving the ability and quality of that sector by using the extra business. This creates a snowball effect.
As for where the actual money ends up, that is much less important.
When China invests into America, it makes sure that most of those investments only become in terms of raw cash and are not converted into industrial/market capabilities.
Both countries have trillions invest in eachother, but the danger of US stealing their part of Chinese investment is overstated, because suddenly having a lot more liquid reserve is pointless if you can't convert money -> stuff. On the other hand, when China seizes US assets, they have a huge trained workforce, well prepared industrial sector and an amazing construction capability, so they could feasibly put that liquidity to more effective use.
At least this is what I've understood, I'm not an economist.