I am not sure, but think they loan dollars. China has been trying to decrease the percentage of dollars in its reserves and using dollars to buy real assets would make sense as defense against the falling value of the dollar. Note China typicaly gets loan paid back in commodities, not dollars. For example, China loaned Brazil's Pertobras 10 billion dollars and will get 200,000 barriels of oil / day for 20 years as the repayment of the loan. (IMHO - a bad deal for Brazil, as oil will be much more valuable in a few years.) It is really more like "lay-a-way" buying than a "loan."