"The poor Chinese are going to lose it all."

I don't know how credible the armageddon scenario is. Of course things don't look good, but the worst prospect for the Chinese seems to me to be a total collapse of the dollar. And I don't think that's too likely while the dollar is still the reserve currency and the exchange rate is under the control of the Chinese government.

Funding the US debt shouldn't be that much of an issue since it is all dollar-denominated, unless the economy seriously crashes. But is that really likely? Oil is going into decline, but the effect on the USA will be slowly felt and people will adapt. We've already seen how much demand can shrink when the economy has only shrunk a matter of a few percent and oil is cheap cheap cheap. When it goes up in cost (as it will do if supply is less than demand) then we will get another round of demand destruction and the price will come down again. This is the cycle we will experience ad infinitum until we work out the alternatives.

Along the way the Chinese will be able to slowly unwind their position, and I'm sure they expect by then that their own economy will be getting into gear and they won't be quite so dependant on export markets.

I'm not a climate or peak oil sceptic, but I'm also not a doomer. I don't think that things are going to be fun, but I also do think that we will get through it, one way or another.