There is some good information here, but in a certain sense the answer about where the actual money goes in China can be answered even more simply.
A big chunk of it goes to the People’s Bank, where it sits in the vault as dollar reserves in order to prevent the RMB from rising in value too quickly on the foreign exchange markets. In December of last year, they were sitting on 2.8 trillion of dollar denominated assets. (That link is to the English page of the People’s Bank. You can find it by clicking on the year 2010 on the main page, then clicking on gold and dollar reserves.) 1.1 trillion of that hoard was in US debt holdings.