Matt, my amateur analysis drawing from Aliber's class at GSB.  
1).  Chinese are exporting goods to the US, importing dollars back into China, and then piling those dollars up rather than using them to buy US goods (thus preventing their currency from rising).  Result is a growing stock of dollars that can basically be seen as a big bucket pent-up currency adjustment.
2).  Put another way, there is a growing but unrecognized loss of value in their dollar holdings sort've like an unrecognized loan loss at a bank.  That loss will either flow through directly via exchange rates or indirectly via inflation (which will also feed through to exchange rates eventually).  
3).  Can't keep this up indefinitely, but pain of un-doing it gets larger and larger as that stock of dollars increases so paradoxically their incentive to avoid that pain grows.  
4).  The best outcome for the Chinese is moderate US inflation, which would depreciate the real-money value of that stock of dollars in a fairly painless and non-transparent way.  Much better than a sharp currency movement.  Happily, this is probably also the best outcome for the US.  
 
CONCLUSION:  the Chinese HAVE to keep buying US debt to keep the RMB down and support their export economy.  Longer-term, the best outcome for the Chinese is to shift toward domestic consumptions and gradually appreciate the RMB through the indirect mechanism of moderate US inflation.  At the end of that, the stock of dollars they have built up are worth a lot less in real terms than they paid for them but hopefully the same in nominal terms and the net loss to the country isn't noticeable in the midst of a big Chinese consumer boom.  Meanwhile the US economy shifts (on the margin) away from consumption and toward export as a result of dollar depreciation in real terms and a resulting shift in terms of trade.  Meanwhile, US consumer purchasing power declines on a relative basis via inflation/currency adjustment.  this is a bummer but it is a lot better than wage and price deflation to achieve the same end.