[xenadu02]

Public debt is just a way to account for spending publicly, instead of printing money. The national debt can grow indefinitely so long as the economy continues to grow. (Fun fact: the US Government does make money out of nothing by minting coins. The Treasury creates them and hands them to the Federal Reserve, who increases the US Government accounts by that amount - creating new money out of nothing).

China buys US debt because they are forced to do so. They print Yuan to buy it which depresses the value of their currency. Some of the Chinese leadership is well aware that the balance of trade with the US and Europe must equalize. They've been taking measures to encourage domestic consumption and a transition away from an export-heavy economy. I don't think they're moving quickly enough because they're scared of disrupting the economy - fearing the Communist government (and their power) won't survive.

If China stopped buying US debt they'd have to buy European debt. If they stopped buying both their currency would appreciate and their exports would not be so cheap.