China has been buying the U.S.'s debt since the mid 90's, when they pegged their currency to the dollar, in order to maintain their peg and keep the yuan from appreciating. From 2005-2008 they abandoned their peg for a managed float and let their currency appreciate about 21% due to pressures from the U.S. because their currency was artificially undervalued which negatively affects the global trade balance and the global economy. In 2008, however, they went back to the peg to protect their export sector and to stabilize their economy and have remained with the peg since.

China has actually dug themselves into a large hole with their monetary policy. The yuan is grossly undervalued and needs to appreciate, however, if they let it appreciate, their U.S. denominated holdings, mostly U.S. Treasury Securities, currently valued at $2.4 trillion, will lose value. It is also in their interest to keep buying our debt because it allows us to keep interest rates down and consume more, and the U.S. is China's largest export market. But on the other hand, if China tries to sell their securities, this will lead to increased supply in the market which will drive down the price of the securities, which will in turn decrease the value of their holdings.

The financial crisis has led to the depreciation of the dollar, and the yuan along with it since it's pegged, compared to most other currencies. This has greatly impacted the emerging and developed countries' economies that rely on exports for growth because they simply cannot compete with China's artificially low export prices.

This is an interesting issue and it will be interesting to see how it plays out. To get a great summary of the current situation, this is a great, quick read that sums it up nicely: http://www.fas.org/sgp/crs/row/RS21625.pdf