Turns out it was another scam by the GOP to blast Obama (from Paul Krugman):
Many prominent politicians made warnings about the dangers posed by U.S. debt, especially debt owned by China, a central part of their political image. Paul Ryan, when he was chairman of the House Budget Committee, portrayed himself as a heroic crusader against deficits. Mitt Romney made denunciations of borrowing from China a centerpiece of his campaign for president. And by and large, commentators treated this posturing as if it were serious. But it wasn’t.
I don’t mean that it was bad economics, although it was. Remember all the dire warnings about what would happen if China stopped buying our debt, or worse yet, started selling it? Remember how interest rates would soar and America would find itself in crisis?
Well, don’t tell anyone, but the much feared event has happened: China is no longer buying our debt, and is in fact selling tens of billions of dollars in U.S. debt every month as it tries to support its troubled currency. And what has happened is what serious economic analysis always told us would happen: nothing. It was always a false alarm.
Beyond that, however, it was a fake alarm. …
Debt, it seems, only matters when there’s a Democrat in the White House. Or more accurately, all the talk about debt wasn’t about fiscal prudence; it was about trying to inflict political damage on President Obama, and it stopped when the tactic lost effectiveness.