They can use it to buy more gold and silver and which they already are. This can cause the Yuan to appreciate, and this gives you to room to print out more Yuan. The US dollars can also be used to buy more imports from other countries like soybeans from Brazil, since you expect China to get less US dollars now for these things because of less exports to the US.Domestic consumers using yuan, not dollar for purchases.
I think there is quite lean stock of yuan in foreign hands, several magnitude smaller than the treasury.
So, how can the treasury sale stimulate the domestic demand ?