An attempt to explain why US debt default will cause inflation in China

This came in as part of conversation trying to answer a question:
"Why the potential of American debt default may cause inflation in China?"

I'm not an economist and don't try to pretend to be one.  However, my initial effort dodge the question was not successful.  So here is my lay person's explanation:

Over the past three decades, the Chinese government have tried very hard to boost up their economy by encourage export, mostly to the US because they are rich. First, they invested heavily in basic infrastructure; second, manufacturing of export is heavily subsided.  In order to do both, the Chinese government, through the Central Bank raised a huge amount of money domestically from selling Chinese Treasurer Bills.

So, they borrowed a lot of money domestically from a population tends to save instead of invest.  This is a smart move since the investment in infrastructure also stimulated domestic economy.

As a result of the rapid growth of export, the manufacturers made a lot of money in US dollar, which can't be circulated domestically in China. In order to pay their bills in China, they exchanged the US dollar into RMB Yuan, where all the US dollar is eventually transferred to the Chinese Central Bank.

In order to make sure this huge US dollar cash reserve not to significantly loose value from global inflation, the Central Bank tried very hard to invest.  However, they only have very limited options for such a huge reserve.  One of these options is to buy US treasurer bills, which they did. 

Now, most of China's savings are now in US Treasury with a guaranteed interest return.  Since US T-Bills are pretty safe and the return is not too bad, the Chinese Central Bank can use the investment return to pay, in part, the interests they own to their own T-Bills in RMB Yuan.  So far, so good.  In the next 30 years, China becomes the largest US T-Bills holders while its economy is booming. 

Now fast forward to 2012. There's a problem with the US economy which pays the interests to the US T-Bills. Rumor has it that it may complete default since the interests becomes too much of the GDP of US.  Although the Feds and the Treasury tried to print out more money, which they legally can to a certain point, most of the interest payment was in fact supported by borrowing more money. On August 2, 2012, a predetermined debt limit is reached and the US will run out of borrowing power hence has no ability to pay off their debts. Of course, the Congress raised the limit in the last minute.  But it's a painful process and there is a real danger that the Americans may default their foreign debt. 

Just the threat of default through China off.  If they loss essentially all their savings in US T-Bills, they won't have any real money to pay off their own RMB Yuan T-Bills. 

Well, that won't be a problem since the Chinese Central Bank can also print money, i.e. RMB Yuan. Since there is no law said how much they can borrow or print, they can just print out whatever they needed.  This is the source of inflation in China:

Too much money that not supported by the product produced. 

Does it make sense?