Do it we convert AUD to USD or other foreign currency owed on the trade.
At the point we convert enough AUD to cover the trade into whatever currency the trade is done and we owe them no more money.
Your analysis seems to think we are importing goods from China on credit.
We are not.
The fact that we buy more than we sell simply means we have a trade deficit.
This means that the country is living beyond its means however this does mean we owe people anything as we are not importing goods and services on credit terms they are cash settled at port/delivery.
The issue is of course not to be confused when Australians borrow money from overseas.
