Japan recently won approval to buy up to 65 billion yuan ($10.58 billion) worth of Chinese government bonds, effectively marking the first sale of yuan-denominated government bonds to a developed nation.

Of course, now there is the risk that this deal will open the flood gates on sales of Chinese government debt overseas. If the world follows Japan's lead and starts devouring yuan-denominated assets, this will push up demand for the yuan and put pressure on the currency to appreciate. If things go too far, a strengthening yuan will make Chinese goods less competitive overseas, undermining the profitability of export manufacturers.

Sales of government bonds in the overseas market could also result in even larger hot money inflows into China if its interest rates stay high. With many countries pulling out all the stops on capital costs, overseas investors may pour into China to profit from interest arbitrage.

The author is Niu Wenxin, an economic commentator.