Fallows makes an important point:

A little earlier I had a testy on-stage exchange with [Niall Ferguson] about the United States and China. He said that U.S. budget deficits would lead to the certain collapse of the U.S.-China relationship, since China would cut off further credit to the spendthrift Yanks. I said that might sound like a neat theory but reflected no awareness of actual Chinese incentives and behavior, and that the showdown he considered "inevitable" in fact would not occur. As it has not.

Niall has made considerable contributions to the argument that holding US bonds is a strategic device advancing China's rise. Back in 2011, Fareed Zakaria broke down why this is off-base:

Here in the U.S. you hear many people worry that the Chinese government might stop buying American T-Bills. I think these fears are vastly overblown. The economic situation between China and the U.S. is the financial version of mutually assured destruction - that cold war doctrine of nuclear deterrence.... China is addicted to a strategy of export-led growth, which requires that it keep its goods cheap. This means keeping its currency undervalued. That's why it buys dollars.

In a 2010 post, economist Michael Pettis framed the issue in a little more detail: