China has the US by the balls via debt
OM F***ing G. I know this is a popular theme on Slashdot, but please STOP. It is wrong, and stems from a serious misunderstanding about what it means to say that "the US owes China money."
Go to your local bank branch, or hop on E*Trade, and buy a $500 US Savings Bond. Congratulations, the US now owes you money! You just gave the US government $500, and they promise to pay you back that $500 in the future plus interest. US bonds and treasury bills are historically among the safest investments in the world, so they are purchased in huge quantities by individuals, banks, retirement funds, businesses, sovereign wealth funds (like China's) and many others. So technically the US government "owes" money to nearly every investor on the planet at some level. The US issues bond/bills like this - incurring debt - all day every day like clockwork, and it continues to be a high-grade investment choice (it pays out little but is very "safe") around the globe.
Slashdotters who don't understand these financial vehicles seem to think that the US was running short of cash one day and came to China like a pawnbroker, saying "Gosh, China, can you float me a few trillion renminbi until payday?" and that China is therefore exercising control over the US like some mobster holding it over a deadbeat debtor. Instead, China has just been buying sh*tloads of US debt over the counter, like everyone else on the planet.
And, really, what can China do to the US if they want to hurt us? Cash in all their debt at once? Fine, but they will not get their full investment back (remember, US T-bills/bonds only pay you back in full once they have reached their maturity date) and the US will just print more dollars to meet the payout need. We'd experience more inflation in the short term, but the US would actually win out in the long run because China cheated itself out of recouping the full amount of money they loaned us! They could start selling US T-bills at a discount, lowering the market for our debt ... but the rest of the world market would snap it all up - yes, even the huge amount that China has - and again they would end up losing money by selling their stake at a discount.
So, once and for all, China has zero political leverage in the US specifically because of its debt holdings. They have a LOT of political leverage because of the size of their market and the resulting pressure from US corporations that want to do business there ... but not specifically due to their debt holdings.