c1ue, i agree with your observation that china's bilateral agreements disintermediate the dollar. i think this kind of incremental change will become increasingly common. in this way foreign cb's will diversify their holdings. e.g. the cb of brazil will end up holding some yuan. but that doesn't constitute the dollar losing its reserve status. the dollar will still be held, but gradually diminish in its importance. the thing that would hasten the dollar's loss of status is the kind of currency event i described above- a defection by a major dollar holder followed by a rush for the exits.

the gradual disintermediation, otoh, will indeed free up some dollar reserves around the world, as you say. and that will hasten the dollar's inflationary loss of value.