Foreign Holdings of Federal Debt
Justin Murray
Information Research Specialist
Marc Labonte
Specialist in Macroeconomic Policy
March 24, 201025, 2011
Congressional Research Service
7-5700
www.crs.gov
RS22331
CRS Report for Congress
Prepared for Members and Committees of Congress
Foreign Holdings of Federal Debt
Summary
This report presents current data on estimated ownership of U.S. Treasury securities and major
holders of federal debt by country. Federal debt represents the accumulated balance of borrowing
by the federal government. To finance federal borrowing, U.S. Treasury securities are sold to
investors. Treasury securities may be purchased directly from the Treasury or on the secondary
market by individual private investors, financial institutions in the United States or overseas, and
foreign, state, or local governments. Foreign investment in federal debt has grown in recent years,
prompting questions on the location of the foreign holders and how much debt they hold.
This report will be updated annually or as events warrant.
Congressional Research Service
Foreign Holdings of Federal Debt
Contents
Selected Statistics on Foreign Holdings of Federal Debt ..............................................................1
Foreign Investment in U.S. Federal Debt: Why Is It an Issue of Concern? ...................................43
Selected CRS Reports .................................................................................................................5
Figures
Figure 1. Breakdown of Official vs. Private Foreign Holdings of U.S. Federal Debt ....................3
Tables
Table 1. Estimated Ownership of U.S. Treasury Securities...............(in billions of dollars) ............................................1
Table 2. The Top 10 Foreign Holders of Federal Debt, by Country ..............................................2
Contacts
Author Contact Information ........................................................................................................65
Congressional Research Service
Foreign Holdings of Federal Debt
Selected Statistics on Foreign Holdings of
Federal Debt
Federal debt represents, in large measure, the accumulated balance of federal borrowing of the
U.S. government. The portion of gross federal debt held by the public consists primarily of
investment in U.S. Treasury securities.1 Investors in the United States and abroad include official
institutions such as the U.S. Federal Reserve, financial institutions such as private banks, and
private individual investors.
Table 1 provides December 20092010 data, available as of March 2010,
2011, on estimated ownership of
U.S. Treasury securities by type of investment and the percentage of
that investment attributable
to foreign investors.2
As the table shows, during the past five years, foreign from December 2005 to December 2010 foreign
holdings of debt increased by nearly $1.8
$2.3 trillion to more than $3.6 trillion from December 2004 to December 20094.3 trillion. During the same
period, total
privately held debt increased by approximately $3.34.4 trillion to $78.4 trillion. 3
In December 20042005, total foreign investment in U.S. federal debt was approximately $1.92 trillion
(5051.2%) of the total of approximately $3.74 trillion in privately held debt. By December 20092010, total
foreign investment in U.S. federal debt grew by 1.2had grown by 1 percentage points to $3.6 trillion (51.4%) of
point to approximately $4.4
trillion (52.2%) of the total of approximately $78.4 trillion in debt held by private investors.34 The
foreign-held share of the federal debt in 2009 and 2010 was slightly lower than the share in 2007
and 2008 because the overall debt grew more quickly than foreign holdings of the debt.
Table 1. Estimated Ownership of U.S.Treasury Securities
(in billions of dollars)
End of
Month
Total Public Debt
Held by All
Private Investors
Total Debt Held by
Foreign Investors
Foreign Holdings as a
Share of Total
Privately Held Public Debt
Dec. 2009
$7,034.5
$3,614.0
51.4%
Dec. 2008
$5,893.4
$3,076.3
52.2%
Dec. 2007
$4,395.7
$2,352.9
53.5%
Dec. 2006
$4,122.1
$2,105.0
51.1%
Dec. 2005
$3,970.6
$2,036.0
51.3%
Dec. 2004
$3,690.6
$1,853.4
50.2%
Source: Table OFS-2: Estimated Ownership of U.S. Treasury Securities from the March 2009 Treasury Bulletin.
See link for “Ownership of Federal Securities” tables at http://www.fms.treas.gov/bulletin/index.html.
2010
$8,368.9
$4,370.0
52.2%
Dec. 2009
$7,034.4
$3,685.1
52.4%
Dec. 2008
$5,893.4
$3,077.2
53.5%
Dec. 2007
$4,395.7
$2,353.2
53.5%
Dec. 2006
$4,122.1
$2,103.1
51.0%
1
Figures on federal debt held by the public are available on the Department of Treasury Bureau of Public Debt website,
“The Debt to the Penny and Who Holds It,” at http://www.treasurydirect.gov/NP/BPDLogin?application=np.
2
This report discusses foreign holdings of U.S. federal debt. Foreign investors also hold U.S. private securities. For
data on foreign holdings of U.S. private securities, see “Survey of ForeignForeign Portfolio Holdings of U.S. Securities,” at
http://www.ustreas.gov/tic/shlhistdat.htmltreasury.gov/resource-center/data-chart-center/tic/Pages/fpis.aspx, produced by the Treasury Department
International Capital System.
3
The publicly held federal debt includes Federal Reserve holdings. The privately held federal debt excludes them.
4
Data are excerpted from Table OFS-2 in the March 2010 Treasury Bulletin. Table OFS-2 presents the estimated
ownership of U.S. Treasury securities. Information is primarily obtained from the Federal Reserve Board of Governors
Flow of Funds data, Table L209. State, local, and foreign holdings include special issues of nonmarketable securities to
municipal entities and foreign official accounts. They also include municipal, foreign official, and private holdings of
marketable Treasury securities.
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Foreign Holdings of Federal Debt
Dec. 2005
$3,970.6
$2,033.9
51.2%
Source: Table OFS-2: Estimated Ownership of U.S. Treasury Securities from the March 2011Treasury Bulletin.
See link for “Ownership of Federal Securities” tables at http://www.fms.treas.gov/bulletin/index.html.
Notes: Table data represent estimated figures current as of March 22, 201017, 2011. For the most current data, connect
to the link listed above. Percentage shares calculated by CRS.
Although gross federal debt is the broadest measure of the debt, it may not be the most important one. The
debt measure that is relevant in an economic sense is debt held by the public. This is the measure of debt that
has actually been sold in credit markets and has influenced interest rates and private investment decisions. This
table reflects that portion of public debt held by all private investors in federal securities and the portion of that
debt held by foreign investors. See CRS Report RL31590, The Federal Government Debt: Its Size and Economic
Significance, by Brian W. Cashell.
Data on major foreign holders (investors) of federal debt by country are provided in Table 2.
According to
the data, the top three estimated foreign holders of federal debt by country, ranked
in descending
order as of December 20092010, are China ($894.81,160.1 billion), Japan ($765.7882.3 billion), and
oil-exporting countries ($207.4 the United
Kingdom ($272.1 billion). Based on these estimates, China holds approximately
24.3 26.1% of all
foreign investment in U.S. privately held federal debt; Japan holds approximately
20.8%; and the oil-exporting countries hold approximately 5.6%.4 19.9%; and the
United Kingdom holds approximately 6.1%.5
Table 2.The Top 10 Foreign Holders of Federal Debt, by Country
(data current as of March 9, 2010)
Amount
Held ($ in
billions; as of
Dec. 2009)
Percentage of
all foreign
holdings in
federal debt
Mainland China
$894.8
24.3%
Japan
$765.7
Oil Exporters
Amount
Held ($ in
billions; as of
Dec. 2004)
Percentage of
all foreign
holdings in
federal debt
Japan
$689.9
37.3%
20.8%
Mainland China
$222.9
12.1%
$207.4
5.6%
United Kingdom
$95.8
5.2%
United Kingdom
$178.0
4.8%
Taiwan
$67.9
3.7%
Brazil
$169.3
4.6%
Oil Exporters
$62.1
3.4%
Hong Kong
$148.7
4.0%
Korea
$55.0
3.0%
Russia
$141.8
3.8%
Carribean
Banking Centers
$51.1
Carribean
Banking Centers
$128.2
3.5%
Germany
$50.3
2.7%
Taiwan
$116.5
3.2%
Hong Kong
$45.1
2.4%
Switzerland
$89.7
2.4%
Switzerland
$41.7
2.3%
Total Top 10
Countries of
Foreign Investors
in Federal Debt
$2,840.1
77.0%
Total Top 10
Countries of
Foreign Investors
in Federal Debt
$1,381.8
74.9%
Total All Foreign
Investment in
Federal Debt
$3689.0
100%
Total All Foreign
Investment in
Federal Debt
$1,849.3
100%
Country
Country
2.8%
Source: Treasury Department International Capital System (TIC), at http://www.treas.gov/tic/mfhhis01.txt.
417, 2011)
As of December 2005
As of December 2010
Country
Mainland China
Percentage of all
Amount Held
foreign holdings
($ billions)
in federal debt
Country
Percentage of all
Amount Held
foreign holdings
($ billions)
in federal debt
$1,160.1
26.1%
Japan
$670.0
32.9%
Japan
$882.3
19.9%
Mainland China
$310.0
15.2%
United Kingdom
$272.1
6.1%
United Kingdom
$146.0
7.2%
Oil Exporters
$211.9
4.8%
Oil Exporters
$78.2
3.8%
$186.1
4.2%
Caribbean Banking
Centers
$77.2
3.8%
Caribbean Banking
Centers
$168.1
3.8%
Korea
$69.0
3.4%
Taiwan
$155.1
3.5%
Taiwan
$68.1
3.3%
Russia
$151.0
3.4%
Germany
$49.9
2.5%
Hong Kong
$134.2
3.0%
Hong Kong
$40.3
2.0%
Switzerland
$107.0
2.4%
Luxembourg
$35.6
1.8%
77.2%
Total Top 10
Countries of
Foreign Investors in
Federal Debt
$1,544.3
76%
Brazil
Total Top 10
Countries of
Foreign Investors
in Federal Debt
$3,427.9
5
Foreign holdings are estimated by the Treasury Department based on the location of the holdings, not the nationality
of the holder. For certain countries, such as the CarribeanCaribbean Banking Centers, many of the holdings are likely owned by
third country citizens.
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Foreign Holdings of Federal Debt
Total All Foreign
Investment in
Federal Debt
$4,438.3
100%
Total All Foreign
Investment in
Federal Debt
$2,033.9
100%
Source: Treasury Department International Capital System (TIC), at http://www.treasury.gov/resource-center/
data-chart-center/tic/Documents/mfhhis01.txt.
Notes: Data, including estimated foreign holders of federal debt historically by month, in these Treasury
Department tables are periodically adjusted. Current monthly estimates are available at http://www.treas.gov/tic/
mfh.txt. Aggregate data totals in Table 1 vary slightly from aggregate data totals in Table 2 because of minor
valuation differences of a few securities for a few of the countries in the complete list of International Financial
Statistics data used by the TIC data.in the data used by the Treasury Department International Capital
System Percentage approximations calculated by CRS. Percentages may vary slightly
not sum to 100% due to rounding.
Foreign holdings as estimated by the Treasury Department can be divided into official
(governmental investment) and private sources. Figure 1 provides data on the current breakdown
of estimated foreign holdings in U.S. federal debt. As the figure shows, 73.371.1% of foreign holdings
in U.S. federal debt are held by governmental sources. Private investors hold the other 26.728.9%.
Figure 1. Breakdown of Official vs. Private Foreign Holdings of U.S. Federal Debt
$986.80
27%
$2,702.20
73%
Debt Held by Official Foreign Investors
Debt Attributed to Private Foreign Investors
Source: Treasury Department International Capital System, http://www.treas.gov/tictreasury.gov/resource-center/datachart-center/tic/Documents/mfhhis01.txt.
Notes: Data in the chart represent estimated figuresDecember 2010 figures and are current as of March 9, 2010. 17, 2011.
Figures are in billions of
dollars. Data in the Treasury Department tables are periodically adjusted. For the most
current estimates, click
on the URL address listed above.
The estimated combined total of all foreign holdings for December 20092011 was $3,689.04,438.3 billion. Data consist of
reported December 20092010 figures from the Treasury Department International Capital System
http://www.treas.gov/tic/mfh.txt. The breakdown between estimated official and private holdings is not publicallypublicly
available on a country-by-country basis. Approximate percentages calculated by CRS.
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Foreign Holdings of Federal Debt
Foreign Investment in U.S. Federal Debt: Why Is It
an Issue of Concern?
Foreign ownership of federal debt has become a growing concern among some Members of
Congress because of the nation’s large and rising trade deficit. During the past three decades, U.S.
national saving has not been adequate to finance its capital investment needs, and borrowing from
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Foreign Holdings of Federal Debt
abroad has covered the gap. For foreigners to invest in the U.S. economy on net, the United States
must import more than it exports (run a trade deficit). When the government runs a budget deficit,
as it has done since 2002, it reduces the national saving rate. This implies that domestic
investment must fall, unless private saving rises or borrowing from abroad increases.56
As seen in Table 1, as the national debt has increased, foreign ownership of U.S. Treasuries has
followed closely, suggesting that the budget deficit has been financed, in part, through borrowing
abroad. By June 2004, foreigners held more than 50% of the public debt held by private investors
for the first time. Although this percentage has no particular economic significance, it may have
other significance.
Since 2002, some observers have been concerned that the nature of foreign purchases of U.S.
Treasuries has changed. Beginning in that year, a significant fraction of the trade deficit was
financed through official purchases of U.S. assets, such as purchases by foreign central banks.
Although no direct data on official purchases of Treasuries by country exist, it can be inferred that
the Treasuries may have been purchased by certain Asian and oil-producing countries because
they were the only countries that had large increases in their foreign reserves during that period.
Although the effect on the U.S. economy of official purchases of Treasuries is the same as private
purchases, the motivations behind the purchases are different. Whereas private purchases are
typically motivated by the profit incentive, official purchases may be motivated by a country’s
desire to keep its exchange rate constant or mitigate its rise against the dollar.67 Many observers
are concerned that the large fraction of national debt held by foreigners has the potential to be
harmful to the U.S. economy. Specifically, they fear that if foreigners suddenly decided to stop
holding U.S. Treasury securities or decided to diversify their holdings, the dollar could plummet
in value and interest rates would rise. Others are concerned that China’s accumulation of hard
currency assets will allow it to undertake activities in the foreign affairs and military realms that
are not in the U.S. interest. Some economists the accumulation of U.S. assets
by foreign governments, such as China, will give those governments leverage that may be applied
to the detriment of U.S. interests. Some economists also argue that foreign borrowing at current
levels is
unsustainable and could cause problems for the U.S. economy down the road.7
When foreigners purchase U.S. Treasuries, or any other U.S. asset, the interest rate is lower than
when borrowing is8
When the United States borrows through sales of U.S. Treasuries to foreign purchasers, or sales
of any U.S. asset to foreign purchasers, the overall interest rates in the United States move slower
than if the borrowing would have been financed domestically out of national saving. Thus, when overallThen
because interest rates
are lower as a result of net capital inflows, more interest-sensitive spending
is undertaken.
Interest-sensitive spending includes capital investment (e.g., production plants and
equipment),
residential investment (e.g., new homes), and durable consumption goods (e.g.,
automobiles and
appliances). On the other hand, U.S. foreign borrowing induces a trade deficit by reducing
reducing exports and import-competing production. The trade deficit occurs because foreigners
must first
5
purchase U.S. dollars before purchasing U.S. assets. When the demand for dollars
increases, the dollar appreciates, making U.S. exports and import-competing goods relatively
more expensive. Thus, foreign borrowing shifts production away from exports and into interestsensitive sectors.9
6
CRS Report RS21409, The Budget Deficit and the Trade Deficit: What Is Their Relationship?, by Marc Labonte and
Gail E. Makinen.
67
See CRS Report RS21951, Financing the U.S. Trade Deficit: Role of Foreign Governments, by Marc Labonte.
78
See CRS Report RL33186, Is the U.S. Current Account Deficit Sustainable?, by Marc Labonte.
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Foreign Holdings of Federal Debt
purchase U.S. dollars before purchasing U.S. assets. When the demand for dollars increases, the
dollar appreciates, making U.S. exports and import-competing goods relatively more expensive.
Thus, foreign borrowing shifts production out of the trade sector and into the interest-sensitive
sector.8
9
CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Policy Options, by Craig K. Elwell.
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Foreign Holdings of Federal Debt
Since the financial turmoil began in August 2007, the supply of Treasury securities has risen
sharply, as a result of the increase in federal borrowing to finance spending on economic and
financial recovery. 9 At the same time, the demand for Treasury securities has risen as there has
been a “flight to quality” caused by greater investor preference for Treasury securities compared
with riskier private securities.
Thus, although an increase in the supply of Treasury securities
would be expected to cause
Treasury yields to rise, they instead fell relative to pre-crisis levels.
Likewise, although the financial turmoil originated in U.S. markets, after the turmoil deepened in
September 2008, net capital inflows pushed up the value of the dollar Foreign demand has
contributed to the low yields that have allowed the U.S. government to finance large deficits at
low cost, though some fear that same foreign demand could prove transient in the future.
Selected CRS Reports
CRS Report RS21409, The Budget Deficit and the Trade Deficit: What Is Their Relationship?, by
Marc Labonte and Gail E. Makinen.
CRS Report RL34314, China’s Holdings of U.S. Securities: Implications for the U.S. Economy,
by Wayne M. Morrison and Marc Labonte.
CRS Report RL31590, The Federal Government Debt: Its Size and Economic Significance, by
Brian W. Cashell.
CRS Report RL34319, Foreign Ownership of U.S. Financial Assets: Implications of a
Withdrawal, by James K. Jackson.
CRS Report RL33186, Is the U.S. Current Account Deficit Sustainable?, by Marc Labonte.
CRS Report RL30520, The National Debt: Who Bears Its Burden?, by Marc Labonte.
CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig K.
Policy Options, by
Craig K. Elwell.
CRS Report RS21951, Financing the U.S. Trade Deficit: Role of Foreign Governments, by Marc
Labonte.
8
CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig K. Elwell.
For details on the liquidity crisis in financial markets starting in August 2007, see CRS Report RL34182, Financial
Crisis? The Liquidity Crunch of August 2007, by Darryl E. Getter et al.
9
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Foreign Holdings of Federal Debt
Author Contact Information
Justin Murray
Information Research Specialist
jmurray@crs.loc.gov, 7-4092
Congressional Research Service
Marc Labonte
Specialist in Macroeconomic Policy
mlabonte@crs.loc.gov, 7-0640
65