What it means is currency is flowing out of the U.S. and products are flowing in. That cash has to come back to the U.S. in some way or its only use is to wallpaper someone's office or wipe someone's ass. It comes back via purchases, investments, or currency exchanges. The exchange rate just depends on the choices being made.
Since the Chinese peg their currency to the dollar, they have no choice but to invest.
So far it hasn't come back in, hence the deficit. When it finally does come back in all that inflation we've been exporting will to China will bite us bad.