There's a bit of a host/parasite relationship going on here. Surely it's not in China's interest (at present) for this situation to escalate out of control. China needs America (and the rest of us happy idiots here in the West) to keep on buying all the cheap clothes and techno gadgets, not to mention pointless plastic McDonalds toys. If we all stop buying, then the whole edifice comes tumbling down. If America completely runs out of money, and the debts can no longer be serviced things could get very interesting. What can China do if it all goes pear shaped? Theres only so much money in the pot. Sooner or later someone, somewhere has to call a halt to this tsunami of debt. My guess is that the loans will never be fully called in. There'll be trade offs, and eventually 'an arrangement' will be reached, in pretty much the same way as any individual or corporate debt situation is resolved.