How Much U.S. Debt Does China Own? (2024)

China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. However, it does not own the most U.S. debt of any foreign country.

Nations borrowing from each other may be as old as the concept of money. Foreign debt provides the opportunity for countries to secure the financing they ordinarily wouldn't have access to and to stimulate their economy.

However, the concept of foreign debt carries a negative connotation, especially when it concerns large amounts owed to nations embroiled in controversy. For example, the huge amount of debt that the U.S. government owes Chinese lenders has been the subject of countless debates, headline news stories, and political platforms for decades.

Key Takeaways

  • The largest holder of U.S. debt is the United States government.
  • The top two foreign holders of U.S. debt are Japan and China.
  • Whether you're an American retiree or a Chinese bank, American debt is considered a sound investment.
  • The Chinese yuan, like the currencies of many nations, is tied to the U.S. dollar.
  • Because of varying maturity dates, China would be unable to call in all its Treasury holdings at once.

How the Ownership of US Debt Works

By mid-2017, the total amount of official debt owed by the federal, state, and local governments was more than $19.8 trillion. That figure was$32.5trillion as of June 30, 2022. Some experts insist on adding hundreds of trillions in unfunded future liabilities on the federal government balance sheet.

Of the $32.5 trillion in government debts, more than $6 trillion is owned by the federal government in trust funds. These are accounts dedicated to Social Security, Medicare, and other entitlements.

In simpler terms, the government wrote itself a really big IOU and bankrupted one account to finance another activity. IOUs are formed and financed through joint efforts of the U.S. Department of the Treasury and the Federal Reserve.

Much of the rest of the debt is owned by individual investors, corporations, and other public entities. This includes everyone from retirees who purchase individual U.S. Treasurys to the Chinese government.

From January 2022 to January 2023, the debt to Japan and China decreased by 15% and 17%, respectively.

Japancommands the top spot among foreign creditors with $1.1 trillion—about 3% of total U.S. debt—owed by the U.S. government. China holds the number two position, holding $859.4 billion of U.S. Treasurys—about 2.6% of the total U.S. debt.

Japanese-owned debt doesn't receive nearly as much negative attention as Chinese-owned debt, ostensibly because Japan is seen as a friendlier nation and the Japanese economy hasn't grown as fast as China's year after year.

The other countries that hold the most U.S. debt include the U.K., with $668.3 billion owed; Belgium, holding $331.1 billion in debt securities; and Luxembourg, slightly behind Belgium with $318.2 billion of the United States' debt.

Why China Owns So Much US Debt

There are two main economic reasons Chinese lenders bought up so many U.S. Treasury securities. The first and most important is that China wants its currency, the yuan, pegged to the dollar. This has been common practice for many countries ever since the Bretton Woods Conference in 1944.

A dollar-pegged yuan helps keep down the cost of Chinese exports, which the Chinese government believes makes it stronger in international markets. This also reduces the purchasing power of Chinese earners.

Effects of Dollar-Pegging

Dollar-pegging adds stability to the yuan since the dollar is still seen as one of the safest currencies in the world. This is the second reason the Chinese want Treasurys; they are essentially redeemable in dollars.

China drew some headlines in 2013 and 2014 for buying up a lot of gold to store in its bank vaults, but the real safety net for the yuan is the worldwide belief in the dollar.

Consequences of Owing Debt to the Chinese

It's politically popular to say that the Chinese "own the United States" because they are such a huge creditor. The reality is very different than the rhetoric.

If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.

While 2.6% of the national debt isn't exactly insignificant, the Treasury Department has had no problems finding buyers for its products even after a rating downgrade.

If the Chinese suddenly decided to call in all of the federal government's obligations (which isn't possible, given the maturities of debt securities), others would likely step in to service the market. This includes the Federal Reserve, which already owns six times as much debt as China.

The Effects on Trade

Second, the Chinese rely on American markets to buy Chinese-produced goods. Artificially suppressing the yuan has made it difficult for a growing Chinese middle class; so, exports are needed to keep businesses running.

Consider what the current arrangement means. The Chinese buy up dollar bills in the form of Treasurys. This helps inflate the value of the dollar. In return, American consumers get cheap Chinese products and incoming investment capital. The average American is made better off by foreigners providing inexpensive services and only demanding pieces of paper in return.

How Much Money Does the U.S. Owe China?

The United States owed China approximately $859.4 billion as of January 2023.

Which Country Owes the Most Money to China?

China does not publish the figures on its international lending. However, there are some countries—such as Niger, Cambodia, and Laos—whose debt to China is more than 20% of their GDP.

Does Any Country Have No National Debt?

According to the International Monetary Fund (IMF), the only nation with no national debt is Macao, a special administrative region of China.

Which Country Has the Most Debt?

Japan has the most debt in the world, accounting for approximately 258.2% of its gross domestic product (GDP).

The Bottom Line

Though China owns a large amount of U.S. debt, it isn't the United States's largest creditor. The greatest amount of U.S. debt is owned by the U.S. government, while the largest foreign creditor is Japan.

China owns around 2.6% of U.S. debt, which it buys because the Chinese yuan is pegged to the dollar. It would be impossible for China to call in all its U.S. debt at once, given the different maturity dates of the U.S. securities that China owns.

How Much U.S. Debt Does China Own? (2024)

FAQs

How Much U.S. Debt Does China Own? ›

China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country. Nations borrowing from each other may be as old as the concept of money.

Who owns most of the US debt? ›

The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world. After the recent weak treasury auction, US government officials warned that they are seeing waning demand from international buyers.

Who owes the US the most money? ›

1. Japan
  • Japan. $1,098.2. 14.52%
  • China. $769.6. 10.17%
  • United Kingdom. $693. 9.16%
  • Luxembourg. $345.4. 4.57%
  • Cayman Islands. $323.8. 4.28%

What happens if China sells US debt? ›

It's going to put it into bonds of other countries. It will have to buy other currencies in order to invest in those countries' bonds. So US interest rates will no doubt rise as the supply of US Treasury bonds suddenly increases and the dollar will fall as China moves a lot of money out of dollars.

Is China dumping US Treasuries? ›

Beijing, vigilant in the protection of its overseas assets, has slashed its holdings of US Treasury bills by 25 per cent since early 2021 to the tune of US$280 billion. Its position hit a 14-year low of US$769.6 billion in October 2023, a decline commonly attributed to a conscious effort to diversify its holdings.

Who owns over 70% of the U.S. debt? ›

Who owns the most U.S. debt? Around 70 percent of U.S. debt is held by domestic financial actors and institutions in the United States. U.S. Treasuries represent a convenient, liquid, low-risk store of value.

Who does China owe debt to? ›

[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).

Who does the US owe trillions to? ›

Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.

Which country has no debt? ›

1) Switzerland

Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.

Does any country owe the US money? ›

China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.

Is China's debt worse than US? ›

As recently as 2020, total debt in the United States relative to GDP exceeded China's. But as of mid-2022, China's relative debt burden stood 40 percent higher than America's.

Does Russia hold U.S. debt? ›

The value of U.S. Treasury securities held by residents of Russia amounted to 33 million U.S. dollars in June 2023, the lowest over the period under consideration. Furthermore, in March 2020, the figure decreased sharply to 3.85 billion U.S. dollars, down from 12.6 billion U.S. dollars one month prior.

Why is China dumping U.S. debt? ›

Selling Treasurys is a fast way to whip up U.S. dollars, and China will sometimes use extra dollars to go out on the global market and buy up their own currency. That artificially pumps up its value. It's like planting someone at an auction to drive up your prices.

What does China own in the United States? ›

China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.

How much US dollars does China have? ›

As of March 2024, China's foreign exchange reserves totaled US$3.245 trillion, which is the highest foreign exchange reserves of any country. The management of foreign exchange reserves is governed by the State Administration of Foreign Exchange (SAFE) and the People's Bank of China.

How much gold is China buying? ›

So far in 2024, China's gold reserves have increased by 22t. And during the past 16 months the PBoC has reported total gold purchases amounting to 309t.

Why does the US owe so much money? ›

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

Do countries still owe the US money from ww2? ›

The case of debts arising from World War II is somewhat less complicated. At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.

What is causing the U.S. national debt? ›

Nearly every year, the government spends more than it collects in taxes and other revenue, resulting in a deficit. (The debt ceiling, set by Congress, caps how much the U.S. can borrow to pay for its remaining bills.) The national debt, now at a historic high, is the buildup of its deficits over time.

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