This week the Secretary of State and the Secretary of Treasury were both in China for talks about the economy. China is the number one holder of US debt according to government figures. $2 trillion of their reserves is made of foreign currency, currently almost half of this reserve is in US debt.
In order to fund the plans that the administration has for government and the economy we need someone to take our 
debt. Despite grumbling, China seems content to continue to take more debt. They are in a difficult situation. If they don’t take on our debt then the Federal Reserve will just print more money to pay for government debt. In doing this, they will contribute to inflation. If inflation gets out of hand then the $800 billion in US debt that China holds will become worth less.
Here are some good quotes from a Bloomberg article:
Central bank Governor Zhou Xiaochuan ruled out any sudden change in the management of the reserves last month after proposing that governments investigate setting up a supranational currency. Premier Wen Jiabao said in March that he was “worried” about the safety of the nation’s U.S. assets. China holds $763.5 billion of Treasuries.
“It’s inevitable that China will continue investing in Treasuries because of the sheer scale of its reserves,” said Ken Peng, an economist with Citigroup Inc. in Beijing. “Diversification will happen at a slow pace, with commodities the favored alternative.”
About 65 percent of China’s reserves are in dollar assets, with the rest mostly in euros, yen and sterling, estimates Wang Tao, an economist with UBS AG in Beijing. It is “difficult to stop buying U.S. Treasuries when markets for most other assets are too small and too illiquid,” she said in a report last month.
Ideally they’ll figure out a way to execute a smooth transition. Given this inevitability a rosy scenario is less international purchasing power for the United States dollar. A worse case scenario is a sudden dump of US dollars. This could result in great instability and loss of wealth within the United States.
