I'm the average person in China. I make 100 dollars of goods. I buy 25 dollars of goods. Where does the 75 dollars go?
Most people invest it, loaning it to others. But how do you invest money? By someone else taking debt.
Most nations around the world are locked into trying to make more than they consume. So if you want to buy German debt you'll find you can't - every dollar you buy from them they'll immidiately go looking to buy someone else's debt in a game of musical chairs.
If there were no net debtor, eventually the production of 100 dollars and purchase of 25 would have to stop. You'll make more than you need and your economy will be halted by deflation, layoffs, and so on.
Enter America and the global economy. Now you can buy USD with those 75 dollars and keep on producing. Because your state is locking you into a trade surplus, the more free economy of the USA is by necessity locked into a deficit. Our companies who try to export immidiately fail to the foreign companies with cheaper labor and state subsidy. The companies trying to export go out of business. The ones using import benefit greatly, and the economy changes.
If we locked out this cycle with tariffs and import restrictions it forces China to face the music. Either their 100 productivity must result in 100 spend, or they will face economic and social issues bad enough to turn that 100 dollars of productive work into 25.
I feel like you have internalized somehow a confusion between the concept of balance of payments and government spending policy - the two are slightly related, but not like this.
If China sells more stuff to the US than the US buys from China, then China ends up being a net holder of US dollars, which end up in some US denominated investment asset. This is the balance of payments. Since China is a net exporter to the US, it is also therefore a net investor in the US.
The question of what the investment ends up being in is affected to some extent by the availability of US debt, but it could equally well end up being in equity or real-estate or whatever.
Debt that cannot be paid well is a problem no matter where it is. The US government is the best place for US debt - they are most equipped to pay it. I'm actually all for how it's being handled here. The debt is a problem in general, no matter the form it takes.
The fact the balance is forced to be off as a result of Chinese policy and our failure to counter it in the name of free trade is the problem.
It forces the US national debt up because if it wasn't the national debt it would be in far more harmful places, so our politicians have no choice. Increase debt or lose your job next election.
