We owe China 1.24 trillion
If I owe you $100 then I have a problem. If I owe you $1.24 trillion then YOU have a problem.
If China starts dumping US sovereign debt then yes, our cost to borrow will rise, but not on the existing debt. And they will eat the loss by selling our devalued bonds. Meanwhile we will be in the same situation that we would have been if they hadn't bankrolled our debt in the first place. Clearly the economic fallout won't be pleasant for anyone, but they hold no leverage on this regard.
