China can't just dump our debt, because their own trade depends on suppressing the Yuan/Dollar exchange rate. If China just dumps our debt they would loose a fortune selling it at a loss and the exchange rate would climb, exactly what we want. They can try mandating an exchange rate by government fiat, but to do that they have to have the dollars to make exchanges themselves. That would require constantly buying dollars at a higher price then they are exchanging locally, essentially reversing the current trade imbalance and not sustainable forever.

The US doesn't have any good leverage over China, but our economies are so intertwined at this point that a trade war would be bad for both. The US is reaching the point though that a trade war might be less bad then continuing the current economic imbalance.

Jay