Foreign Holdings of Federal Debt
Justin Murray
Information Research Specialist
Marc Labonte
Specialist in Macroeconomic Policy
July 3, 2012
Congressional Research Service
7-5700
www.crs.gov
RS22331
CRS Report for Congress
Pr
epared 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.

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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?..................................... 4

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 ............................................................. 1
Table 2. The Top 10 Foreign Holders of Federal Debt, by Country ................................................ 2

Contacts
Author Contact Information............................................................................................................. 5

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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 2011 data, available as of June 2012, 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 five years from December 2007 to December 2011, foreign
holdings of debt increased by $2.6 trillion to approximately $5.0 trillion. During the same period,
total privately held debt increased by approximately $4.4 trillion to $8.8 trillion.3
In December 2007, total foreign investment in U.S. federal debt was approximately $2.4 trillion
(53.5%) of the total of approximately $4.4 trillion in privately held debt. By December 2011, total
foreign investment in U.S. federal debt had grown by 3.4 percentage points to approximately
$5 trillion (56.9%) of the total of approximately $8.8 trillion in debt held by private investors.4
The 56.9 percentage share in December 2011 represents the largest share of privately held public
debt attributed to foreign holdings since these estimates have been compiled.
Table 1. Estimated Ownership of U.S. Treasury Securities
(in billions of dollars)
Foreign Holdings as a
End of
Total Public Debt Held
Total Debt Held by
Share of Total Privately
Month
by All Private Investors
Foreign Investors
Held Public Debt
Dec. 2011
$8,783.3
$4,996.0
56.9%
Dec. 2010
$8,368.9
$4,435.6
53.0%
Dec. 2009
$7,034.4
$3,685.1
52.4%
Dec. 2008
$5.893.4
$3,077.2
52.2%
Dec. 2007
$4.395.7
$2,353.2
53.5%

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 “Foreign Portfolio Holdings of U.S. Securities,” at
http://www.treasury.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 June 2011 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

Source: Table OFS-2: Estimated Ownership of U.S. Treasury Securities from the June 2012 Treasury Bulletin. See
link for “Ownership of Federal Securities” tables at http://www.fms.treas.gov/bul etin/index.html.
Notes: Table data represent estimated figures current as of June 1, 2012. 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 al 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 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 2011, are China ($1,151.9 billion), Japan ($1,058 billion), and Oil Exporter
countries ($258.3 billion).5 Based on these estimates, China holds approximately 23.1% of all
foreign investment in U.S. privately held federal debt; Japan holds approximately 21.2%; and Oil
Exporter Countries hold approximately 5.2%.6 Estimates for debt investments transacted in the
United Kingdom, historically one of the larger foreign holders of federal debt, dropped
substantially from December 2010 ($270.4 trillion) to December 2011 ($111.7 trillion).
Table 2. The Top 10 Foreign Holders of Federal Debt, by Country
(data current as of June 1, 2012)

As of December 2011

As of December 2007
Amount Held Percentage of all
Amount Held Percentage of all
Country
($ billions) foreign holdings
Country
($ billions) foreign holdings
in federal debt
in federal debt
Mainland China
$1,151.9
23.1%
Japan
$581.2
24.7%
Japan $1,058.0
21.2%
Mainland
China
$477.6
20.3%
Oil Exporters
$258.3
5.2%
United Kingdom
$158.1
6.7%
Brazil $226.9
4.5%
Oil
Exporters
$137.9
5.9%
Caribbean Banking
$226.0 4.5%
Brazil
$129.9 5.5%
Centers
Taiwan $177.3
3.6%
Caribbean
Banking
$116.4 5.0%
Centers
Russia $149.5
3.0%
Luxembourg
$69.7
3.0%
Luxembourg $147.6 3.0%
Hong
Kong $51.2 2.2%
Switzerland $142.3
2.9%
Germany
$41.7 1.8%
Belgium $135.2
2.7%
Singapore $39.8
1.7%

5 The Treasury Department International Capital Systems (TIC) lists the Oil Exporting to include Ecuador, Venezuela,
Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya,
and Nigeria.
6 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 Caribbean Banking Centers, many of the holdings are likely owned by
third country citizens.
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Foreign Holdings of Federal Debt


As of December 2011

As of December 2007
Amount Held Percentage of all
Amount Held Percentage of all
Country
($ billions) foreign holdings
Country
($ billions) foreign holdings
in federal debt
in federal debt
Total Top 10
Total Top 10
Countries of
$3,673.0 73.7%
Countries of
$1,803.5 76.9%
Foreign Investors
Foreign Investors in
in Federal Debt
Federal Debt
Total All Foreign
Total All Foreign
Investment in
$4,996.4 100%
Investment in
$2,353.2 100%
Federal Debt
Federal Debt
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 in the data used by the TIC. Percentage approximations calculated by
CRS. Percentages may 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, 72.4% ($3,614.9 billion)
of foreign holdings in U.S. federal debt are held by governmental sources. Private investors hold
the other 27.6% ($1,381.5 billion).
Figure 1. Breakdown of Official vs. Private Foreign Holdings of U.S. Federal Debt

Source: Treasury Department International Capital System, http://www.treasury.gov/resource-center/data-
chart-center/tic/Documents/mfhhis01.txt.
Notes: Data in the chart represent estimated December 2011 figures and are current as of June 1, 2012. 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 2011 was $4,996.4 billion. Data consist of
reported December 2011 figures from the TIC http://www.treas.gov/tic/mfh.txt. The breakdown between
estimated official and private holdings is not publicly 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
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.7
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. Since June 2004, foreigners held more than 50% of the public debt held by private
investors.
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.8 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 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.9
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. Then
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 exports and import-competing production. The trade deficit occurs because foreigners

7 CRS Report RS21409, The Budget Deficit and the Trade Deficit: What Is Their Relationship?, by Marc Labonte and
Gail E. Makinen.
8 See CRS Report RS21951, Financing the U.S. Trade Deficit: Role of Foreign Governments, by Marc Labonte.
9 See CRS Report RL33186, Is the U.S. Current Account Deficit Sustainable?, by Marc Labonte.
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Foreign Holdings of Federal Debt

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 away from exports and into interest-
sensitive sectors.10
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. At the same time, the demand for Treasury securities has risen as there has
been 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. 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.


Author Contact Information

Justin Murray
Marc Labonte
Information Research Specialist
Specialist in Macroeconomic Policy
jmurray@crs.loc.gov, 7-4092
mlabonte@crs.loc.gov, 7-0640


10 CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Policy Options, by Craig K. Elwell.
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