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I assume China is making these trades in the foreign exchange market. (Which is like a stock market for trading currencies.)

https://en.wikipedia.org/wiki/Foreign_exchange_market

If so, anyone could be on the other side of the trade, including other governments, banks, speculators, investors, and businesses. The USD are transferred to the other party, out of China if appropriate.

> Who is selling the CNY for USD?

i m guessing currency traders, who sees a good deal selling their CNY for USD for more than they purchased the CNY prior.

The CNY are coming from the open market, people who have yuan and want to have dollars. Since it's the open market, they can do whatever they want with those dollars after the trade. Thus, this is putting more dollars into circulation.