China holds about the same amount as Japan, and if you count Europe as a region, then Europe holds more than either of them.
Furthermore it doesn't really matter: it's not like they can 'call the debt.' China has to wait for their bonds to mature just like everyone else. Really it's rather nice of China to loan us the money.
You're right it doesn't matter that China has loaned us tons of money. You can talk your way around it and Wall Street and the American media outlets have done this for years but it does not change the facts. China continues to grow as an economic threat to the US and we don't want to believe it.
You've been saying that across this thread, but let's say that Chinese banks start to go bankrupt because of nonperforming loans. The Chinese central bank holds large amounts of US treasury bonds. What would be the effect of the bankruptcies? A sell-off to bail out Chinese banks? How would that work; they'd get dollars for their tbonds; then what? Would it depress tbond yields? They can't go much further before you have to pay to hold them... I don't understand the reasoning behind the 'but the Chinese hold lots of US debt!' argument. This isn't like a mortgage where the lender can call in the loan at any point, and if you don't pay they'll repossess your house; or a loan from a loan shark who'll break your kneecaps if you don't pay up. What would happen with or because of these debts?
