Foreign Ownership of U.S. Government Debt Passes $6 Trillion

September 2, 2014

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By Terence P. Jeffrey

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Vice President Joe Biden and Chinese Vice President Li Yuanchao listen to national anthems in Beijing on Dec. 4, 2013. (AP Photo/Lintao Zhang)

- For the first time in the nation’s history, foreign interests now own more than $6 trillion in U.S. government debt, according to the most recent Treasury Department report on major foreign holders of the debt, which includes the numbers through the end of June.

As of the end of June, foreign owners held $6,013,200,000,000 in U.S. Treasury securities, up from $5,976,500,000,000 as of the end of May.

Thirteen years ago, at the end of June 2001, the foreign-held U.S. government debt was $983,300,000,000—and had been trending downward for four months. Since then, it has grown more than six-fold.

Of the $6,013,200,000,000 in U.S. government debt held by foreign interests, $4,108,200,000,000 was categorized by the Treasury as “foreign official” debt holdings---meaning it was owned by institutions controlled by foreign governments.

“Foreign official institutions,” says the Treasury, “include the following: 1. Treasuries, including ministries of finance, or corresponding departments of national governments; central banks, including all departments thereof; stabilization funds, including official exchange control offices or other government exchange authorities; and diplomatic and consular establishments and other departments and agencies of national governments. 2. International and regional organizations. 3. Banks, corporations, or other agencies (including development banks and other institutions that are majority-owned by central governments) that are fiscal agents of national governments and perform activities similar to those of a treasury, central bank, stabilization fund, or exchange control authority."

The largest share of the foreign-owned U.S. government debt is held by interests in Mainland China, which owned $1,268,400,000,000 in U.S. Treasury securities as of the end of June. (Another $158,200,000,000 is held by interests in Hong Kong.)

The second largest share of the foreign-owned U.S. government debt is held by interests in Japan, which owned 1,219,500,000,000.

The third largest share of foreign-owned U.S. government debt is held by interests in Belgium, which owned $364,100,000,000 in Treasury securities at the end of June. The fourth largest share was held by interests in what the Treasury calls “Carribbean Banking Centers” (Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, Panama, and the British Virgin Islands), which owned $308,300,000,000 in Tresury securities at the end of June. And the fifth largest share was held by interests in nations characterized by Treasury as “Oil Exporters” (Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.) Interests in these nations owned $262,100,000,000 in Treasury securities.

As of the end of June, the Federal Reserve owned $2,396,972,000,000 in U.S. Treasury securities. Together, the $6,013,200,000,000 in U.S. Treasury securities owned by foreign interests and the $2,396,972,000,000 owned by the Federal Reserve equaled $8,410,172,000,000 in U.S. government debt. That was about 67 percent of the $12,572,219,622,017.57 in U.S. government debt "held by the public," which includes debt borrowed from individuals, corporations and foreign and domestic government entities outside of the federal government itself.

The total U.S. government debt at the end of June was $17,632,606,234,365.92. This included the $12,572,219,622,017.57 in debt held by the public plus $5,060,386,612,348.35 in what the Treasury calls “intragovernmental debt,” which includes money the government has borrowed from such things as the Social Security trust fund to cover other government expenses.

A 2013 Congressional Research Service report on Chinese holdings of U.S. government debt noted efforts by the U.S. government to reassure the government of the People’s Republic of China that U.S. government debt is a good investment.

“Since the beginning of the global financial crisis in 2008, U.S. government officials have increasingly sought to offer assurances to Chinese officials regarding the safety of China’s holdings of U.S. government debt securities and to encourage China to continue to purchase U.S. securities,” said the CRS report. “For example, during her first visit to China on February 21, 2009, (then) Secretary of State Hillary Rodham Clinton was quoted as saying that she appreciated ‘greatly the Chinese government's continuing confidence in the United States Treasuries,’ and she urged the government to continue to buy U.S. debt.”

The CRS report continued: “However on March 13, 2009, (then) Chinese Premier Wen Jiabao at a news conference stated: ‘We’ve lent a huge amount of capital to the United States, and of course we’re concerned about the security of our assets. And to speak truthfully, I am a little bit worried. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

“The U.S. debt issue was a major topic during Vice President Joe Biden’s trip to China in August 2011,” said the CRS report. “At a meeting with Chinese Premier Wen Jiabao on August 19, 2011, Vice President Biden stated that ‘we appreciate and welcome your concluding that the United States is such a safe haven because we appreciate your investment in U.S. treasuries. And very sincerely, I want to make clear that you have nothing to worry about in terms of their—their viability.’”

The latest State Department report on human rights in China says: “The People’s Republic of China (PRC) is an authoritarian state in which the Chinese Communist Party (CCP) constitutionally is the paramount authority. CCP members hold almost all top government and security apparatus positions.”