There exists more than a few points to make note of in relation to China and how much impact their decisions have on the U.S. economy.  Here is a short list:

• In the first six months of this year China spent $31B on hard assets and $23B on U.S. Treasuries.  This is a strong shift away from U.S. dollar investments and clearly demonstrates their disagreement with the latest actions by the Federal Reserve to buy us U.S. debt.  They know the dollar is being devalued and they're minimizing their risk.
• China needs to balance their shift away from U.S. investments carefully - if they move too quickly, they risk disrupting the manufacture and export of Chinese goods to the U.S. market.  In the short term they need us as much as we need them.  However, as their domestic market continues to surge and they diversify into other nations, dependence on the U.S. market becomes less critical and they will be more confident in accelerating investments away from the U.S..  In other words, they will buy less and less of our debt.
• China's net purchase of U.S. debt is likely to drop 45% this year when compared to 2009.  Private sector comment - what happens to companies when they lose nearly 50% of their biggest customer?  Layoffs happen - especially when you're talking about a customer as big as China.  Since we're not talking private sector impacts - what happens here?  We shift the debt from the Treasury to the Federal Reserve...uh, you mean we sold it to ourselves and then patted ourselves on the back for making a great deal.    Yep.
• China holds $2.5 trillion in foreign-exchange reserves or roughly 25% of all foreign-exchange reserves in the world.  They have cash to burn - their buying spree is a long-term trend.

If we think the economic strength of China is problematic today...give it another ten years.  China has a lot of growth left in it and we're busy spending our way into deeper debt, deluding ourselves by selling our own debt to ourselves and devaluing the dollar.  As some would say... this is not going to be pretty.

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