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How would that work exactly? China starts selling t-bills. Selling to whom? Buyers. Now non-Chinese buyers have the bills. Are those bills repudiated? Also, since the sell-off is a legitimate threat, it seems to follow that the market for t-bills is so liquid, that repudiating those bills belonging to one entity would be technically impossible.

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Who will buy a debt that will not be repaid?

T-Bills are tracked via the book entry system. I.e., the Treasury keeps a registry of who owns what debt. So all we need to do is repudiate all the debt that China currently owns. Then there will be no buyers.

all we need to do is repudiate all the debt that China currently owns

At which point every other holder of U.S. Treasuries will wonder "Am I next?". This will lead to a massive sales of U.S. debt instruments around the world, and would not be good for anyone.

So China engages in open hostilities against us, and we tank their bonds.

Now UBS will worry we will do the same to them, perhaps in response to Switzerland becoming hostile? Nomura dumps our bonds in anticipation of Japan going all 1942 on us?

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