Order Code RS22331
Updated March 12, 2008
Foreign Holdings of Federal Debt
Justin Murray
Information Research Specialist
Knowledge Services Group
Marc Labonte
Specialist in Macroeconomics
Government and Finance Division
Summary
This report presents current data on estimated ownership of United States 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, United States 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.
Federal debt represents, in large measure, the accumulated balance of federal
borrowing of the United States 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 United States Federal
Reserve, financial institutions such as private banks, and private individual investors.
Table 1 provides December 2007 data, available as of March 2008, on estimated
ownership of U.S. Treasury securities by type of investment and the percentage of that
investment attributable to foreign investors.2
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 Foreign
Holdings of U.S. Securities,” at [http://www.ustreas.gov/tic/shlhistdat.html], produced by the
Treasury Department International Capital System.

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As the table shows, during the past five years, foreign holdings of debt increased by
just over $1 trillion to more than $2.3 trillion from December 2002 to December 2007.
During the same period, total privately held debt increased by approximately $1.4 trillion
to $4.4 trillion.
In December 2002, total foreign investment in U.S. federal debt was approximately
$1.2 trillion (41.3%) of the total $3 trillion in privately held debt. By December 2007,
total foreign investment in U.S. federal debt grew by 11.8% to approximately $2.335
trillion (53.1%) of all debt held by private investors.3
Table 1. Estimated Ownership of U.S. Treasury Securities
(in billions of dollars)
Foreign Holdings as a
Total Public Debt
End of
Total Debt Held by
Share of Total
Held by All
Month
Foreign Investors
Privately Held Public
Private Investors
Debt
Dec. 2007
$4,395.7
$2,335.3
53.1%
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%
Dec. 2003
$3,377.9
$1,533.0
45.4%
Dec. 2002
$3,018.5
$1,246.8
41.3%
Source: Table OFS-2: Estimated Ownership of U.S. Treasury Securities from the March 2008 Treasury
B u l l e t i n . S e e l i n k f o r “ O w n e r s h i p o f F e d e r a l S e c u r i t i e s ” t a b l e s a t
[http://www.fms.treas.gov/bulletin/index.html]. Data in the table above represent estimated figures current
as of March 5, 2008. For the most current data, connect to the link listed above. Percentage shares
calculated by CRS.
Notes: 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 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
3 Data are excerpted from Table OFS-2 in the March 2008 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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country, ranked in descending order as of December 2007, are Japan ($581.2 billion),
China ($477.6 billion), and the United Kingdom ($157.4 billion). Based on these
estimates, Japan holds approximately 24.7% of all foreign investment in U.S. privately
held federal debt; China holds approximately 20.3%; and the United Kingdom holds
approximately 6.7%.
Table 2. The Top 10 Foreign Holders of Federal Debt, by Country
(Data current as of March 5, 2008)
Percentage of
Percentage of
Amount Held
Amount Held
all foreign
all foreign
Country
($ in billions;
Country
($ in billions;
holdings in
holdings in
as of Dec. 2007)
as of Dec. 2002)
federal debt
federal debt
Japan
$581.2
24.7%
Japan
$378.1
30.6%
Mainland China
$477.6
20.3%
Mainland China
$118.4
9.6%
United Kingdom
$157.4
6.7%
$80.0
6.5%
United Kingdom
Oil Exporters
Carribean
$137.9
5.9%
$50.3
4.0%
Banking Centers
Brazil
$129.9
5.5%
Oil Exporters
$49.6
4.0%
Carribean
$116.7
5.0%
Hong Kong
$47.5
3.8%
Banking Centers
Luxembourg
$69.7
3.0%
Korea
$38.0
3.1%
Hong Kong
$51.1
2.2%
Taiwan
$37.4
3.0%
Germany
$41.7
1.8%
Germany
$37.3
3.0%
Singapore
$39.8
1.7%
Switzerland
$34.0
2.8%
Total Top 10
Total Top 10
Countries of
Countries of
$1,803.0
76.6%
$870.6
70.5%
Foreign Investors
Foreign Investors
in Federal Debt
in Federal Debt
Total All Foreign
Total All Foreign
Investment in
$2,353.8
100%
Investment in
$1,235.6
100%
Federal Debt
Federal Debt
Source: The Treasury Department International Capital System provides data on estimated foreign holders of
federal debt historically by month on its website at [http://www.treas.gov/tic/mfhhis01.txt]. Current monthly
estimates are available at [http://www.treas.gov/tic/mfh.txt].
Notes: Data, including historical data, in these Treasury Department tables are periodically adjusted. Data in
the table above represent estimated amounts current as of March 5, 2008. For the most current data connect
to the link listed above. Percentage approximations calculated by CRS. Percentages may vary slightly due to
rounding.
Foreign investment 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, 69.7%
of foreign holdings in U.S. federal debt are held by governmental sources. Private investors
hold the other 30.3%.

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Figure 1. Breakdown of Official vs. Private
Foreign Holdings of U.S. Federal Debt
Billions of Dollars
$712.80
30.3%
$1,641.00
69.7%
Debt Held by Official Foreign Investors
Debt Attributed to Private Foreign Investors
S o u r c e : T r e a s u r y D e p a r t m e n t I n t e r n a t i o n a l C a p i t a l S y s t e m ,
[http://www.treas.gov/tic/mfhhis01.txt].
Notes: Data in the chart represent estimated figures current as of March 5, 2008. 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 2007 was $2,353.8 billion.
Data consist of reported December 2007 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 publically available on a country-by-country basis. Percentages
approximated by CRS.
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 abroad has covered the gap. In order 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.4
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
4 CRS Report RS21409, The Budget Deficit and Trade Deficit: What Is Their Relationship?, by
Marc Labonte and Gail Makinen.

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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,
one can infer 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.5 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 argue that foreign borrowing at current
levels is unsustainable and could cause problems for the U.S. economy down the road.6
When foreigners purchase U.S. Treasuries, or any other U.S. asset, the interest rate is
lower than when borrowing is financed domestically out of national saving. Thus, when
overall 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 exports and import-competing production. The
trade deficit occurs because foreigners must first 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.7
Selected CRS Reports
CRS Report RS21409. The Budget Deficit and Trade Deficit: What Is Their Relationship?,
by Marc Labonte and Gail E. Makinen.
CRS Report RL31590. Federal Government Debt: Its Size and Economic Significance, by
Brian W. Cashell.
5 See CRS Report RS21951, The U.S. Trade Deficit: Role of Foreign Governments, by Marc
Labonte and Gail Makinen.
6 See CRS Report RL33186, Is the U.S. Current Account Deficit Unsustainable?, By Marc
Labonte.
7 CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig
Elwell.

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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 Unsustainable?, by Marc
Labonte.
CRS Report RL30520. The National Debt: Who Bears Its Burden?, by Marc Labonte and
Gail E. Makinen.
CRS Report RL31032. U.S. Trade Deficit: Cause, Consequences, and Cures, by Craig K.
Elwell.
CRS Report RS21951. The U.S. Trade Deficit: Role of Foreign Governments, by Marc
Labonte and Gail E. Makinen.

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