Exactly. If China dumps their bonds rates are going to go to the sky and the US currency will depreciate. No one wants to do this but no one will want to sit on the sidelines holding billions of US bonds if this starts happening. It's not that different than a run on a bank that does not have enough reserves. (well, it's a little bit different, a bank can't print money)

What everyone is trying to do is figure out a way to unwind this slowly and/or grow out of it. I think a lot of past growth was fuelled by population growth and "free" resources (oil, coal, etc.). Population isn't growing as fast and resources aren't as free any more.