China is in debt because the government wants to be in debt. They have to be to have population control. If there were no debt their population would have already busted.

The oligarchs who rule China don't use Chinese currency. So they are not impacted by debt levels. China also doesn't promote their currency internationally as a means of keeping domestic purchasing power low.

If you threaten China they will reverse these decisions and actually try to compete for quality of life. That's where western civilization as we know it ends. That's where the American empire falls and the Chinese empire rises.

This would require political revolution. The system is set up and dependent on a complex net of patronage among the elites. Competing for quality of life would mean taking their chips. People don't like it when you take their chips.

This might have been possible to do peacefully before Xi. But he's shown the cost of the competition is high. If you come in second place, you don't get another shot in five or ten years. You lose the chance of a lifetime, and will likely see yourself and your family persecuted by the state.