Mittromney oct13
Republican presidential candidate, former Massachusetts Gov. Mitt Romney speaks to a crowd at Shawnee State University October 13, 2012 in Portsmouth, Ohio. - 

Correction: An earlier version of this story misidentified the largest holder of U.S. debt. It is the U.S. government. China is the largest foreign debt holder.

Mitt Romney has been hitting China pretty hard in ads and on the campaign trail, saying that if elected, he would declare the country a currency manipulator on his first day in office. He has also criticized policies that he says force the U.S. to borrow money from Beijing. China is the number one holder of U.S. debt other than the U.S. government. But the campaign rhetoric may have to change: Bloomberg reported that Japan is set to become the world's largest holder of U.S. Treasuries.

In the first presidential debate, Mitt Romney said he'd evaluate whether to fund government programs this way: "Is the program so critical that it's worth borrowing money from China to pay for it? And if not, I'll get rid of it."

The notion that China is an ATM the U.S. withdraws money from when it needs it bothers a lot of economists here in China.   

"The argument that the U.S. is borrowing from China to fund the fiscal deficit is nonsense," says Peking University economist Michael Pettis.

He says, economically speaking, the U.S. doesn't borrow from China. China exports capital to the U.S., and when it does that, it buys U.S. Treasury securities. Doing so doesn't give China leverage over the U.S. as much as it ties China to the overall success of the U.S. economy. So, Pettis says, it's irrelevant which country owns the most U.S. debt.   

"Foreign central banks are actively purchasing U.S. Treasuries as a way of generating domestic growth" Pettis says. "That means the U.S. is exporting demand and its unemployment is higher than it otherwise should be."   

All the China-bashing is getting on the nerves of author and consultant James McGregor, too. He's says it's interesting China is becoming more of a central issue in the campaign.

"Their rhetoric is kind of silly and nonsensical at times, but the issue is being highlighted in a way that it hasn't been before, and the reason for that is that it's a very serious issue," he says.

A serious issue, McGregor adds, that's oversimplified by misleading campaign rhetoric on both sides.

Follow Rob Schmitz at @rob_schmitz