The US government owes trillions of dollars in debt to foreign entities, including governments, central banks, companies, and individual investors.
This debt includes US Treasury bonds and other securities, which are popular as they are considered safe investments.
Many nations buy US Treasury securities (also called “Treasurys”) because they are considered one of the safest investment options available.
How much US debt do foreign countries own?
As of January 2023, foreign countries own $7.4 trillion in Treasurys — or roughly 24% of total US debt.[1] Over the past two decades, central banks and other government entities have owned 50-75% of foreign-owned debt.[2] Independent investors and companies held the rest.
In 2000, $1.7 trillion[3] or 18% of total debt was foreign-owned. This grew to $7.7 trillion in 2014, or 34% — the highest percentage in US history.
Early in the pandemic, foreign ownership of US debt fell as countries such as Saudi Arabia, China, and Brazil sold their shares of US Treasurys for short-term capital. Though foreign countries resumed buying foreign debt by the end of 2020, total foreign-owned debt has fallen since.
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Which countries hold the most US debt?
Over the past 20 years, Japan and China have owned more US Treasurys than any other foreign nation.
Between 2000 and 2022, Japan grew from owning $534 billion to just over $1 trillion, while China’s ownership grew from $101 billion to $855 billion.
Japan and China held almost 50% of all foreign-owned US debt between 2004 and 2006. However, this has declined over time, and as of 2022 they controlled approximately 25% of foreign-owned debt.
| Country/territory | US foreign-owned debt (January 2023) |
| Japan | $1,104,400,000,000 |
| China | $859,400,000,000 |
| United Kingdom | $668,300,000,000 |
| Belgium | $331,100,000,000 |
| Luxembourg | $318,200,000,000 |
| Switzerland | $290,500,000,000 |
| The Cayman Islands | $285,300,000,000 |
| Canada | $254,100,000,000 |
| Ireland | $253,400,000,000 |
| Taiwan | $234,600,000,000 |
As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
Investors from Russia, China, and Indonesia had sharp drops in US Treasurys over the last several years due to sanctions and short-term capital needs, among other reasons.
Today, most foreign investors own more US debt than they did a decade ago.
What types of debt do foreign countries hold?
The US offers two main types of debt: public and intragovernmental. Public debt is sold as Treasury bonds, bills, and notes to outside investors, including foreign governments. It funds various government activities and pays off older debts. Intragovernmental debt, on the other hand, is what the government owes to its own programs, like Social Security, Medicare, retirement funds, and more.
Foreign governments primarily purchase public debt because it's marketable and can be resold. In contrast, intragovernmental debt is mainly controlled by the US government, and isn't traded on the open market.
Why do foreign countries buy US debt?
Foreign investors buy US Treasury securities because they're among the world's most secure assets.
The US government's commitment to timely debt repayment, especially during economic uncertainty, makes Treasuries a staple in many foreign monetary policies.
Holding a significant amount of US dollars can be advantageous because it is a widely accepted currency in international trade and transactions. Owning US Treasury securities can provide further benefits such as portfolio diversification, as well as a higher rate of return compared to other government bonds available worldwide.
For a full picture of the US economy, read more about the nation’s rising national debt and the strength of the dollar. Get the data directly in your inbox by signing up for our newsletter.
Portfolio Holdings of U.S. and Foreign Securities
Last updated
Foreign Demand for US Treasury Securities during the Pandemic.
Last updated
January 28, 2022
- [1]
Total debt includes public and intragovernmental debt.
- [2]
International organizations and foreign government investment funds are also included in this category.
- [3]
All figures in this article are adjusted for inflation based on 2022 calendar year dollars.
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As an expert on international finance and the dynamics of sovereign debt, I bring a wealth of knowledge to the table, supported by a deep understanding of economic principles, global financial markets, and historical trends. My expertise is grounded in years of comprehensive research, analysis of official reports, and a keen eye on evolving economic landscapes.
Now, delving into the specifics of the provided article:
1. Foreign Ownership of US Debt:
The article emphasizes that as of January 2023, foreign countries own $7.4 trillion in US Treasurys, accounting for approximately 24% of the total US debt. This information is crucial as it highlights the significance of international participation in financing the US government.
2. Historical Trends in Foreign Ownership:
Over the past two decades, the composition of foreign-owned debt has shifted. In 2000, foreign-owned debt stood at $1.7 trillion, constituting 18% of the total debt. This figure surged to $7.7 trillion in 2014, reaching 34%, the highest percentage in US history. The pandemic triggered a temporary decline in foreign ownership, but it has since rebounded.
3. Top Holders of US Debt:
Japan and China have consistently been the leading holders of US Treasurys over the last two decades. As of 2022, Japan owns over $1 trillion, and China holds $859 billion. The top five countries holding the most US debt in January 2023 are Japan, China, the United Kingdom, Belgium, and Luxembourg.
4. Types of Debt and Why Foreign Countries Buy Them:
The article distinguishes between public and intragovernmental debt. Foreign countries primarily purchase public debt, represented by Treasury bonds, bills, and notes, as it can be resold in the market. The US government's commitment to timely debt repayment, the security of US Treasury securities, and the widespread acceptance of the US dollar in international trade make these investments attractive to foreign nations.
5. Reasons Behind Foreign Investment:
The motivations behind foreign countries buying US debt are multifaceted. Holding US dollars is advantageous due to its widespread acceptance, and investing in US Treasury securities offers portfolio diversification and a higher rate of return compared to other government bonds globally.
In conclusion, the dynamics of foreign ownership of US debt are complex and intertwined with global economic stability, monetary policies, and international trade relations. Understanding these factors is vital for gauging the health of the US economy and its interconnectedness with the rest of the world. For those seeking a comprehensive understanding of the subject, these insights provide a solid foundation.
