I've heard too many misquoted figures lately regarding how much US government debt China currently owns. I've also heard correct figures but without any context. Here are the figures from the end of 2008.
China is the largest foreign owner of US government debt however as a percentage of total outstanding debt, China's stake is relatively small, too small to have any significant effect on the US economy or interest rates.
For an up to date accounting of all foreign holders of US government debt, visit the Treasury's website: http://www.treas.gov/tic/mfh.txt and for a breakdown of the entire national debt visit: http://www.treasurydirect.gov/govt/reports/pd/mspd/mspd.htm