Foreign Investment in U.S. Securities
James K. Jackson
Specialist in International Trade and Finance
March 5, 2014
Congressional Research Service
7-5700
www.crs.gov
RL32462

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Foreign Investment in U.S. Securities

Summary
Foreign capital inflows play an important role in the U.S. economy by bridging the gap between
domestic supplies of and demand for capital. Such inflows peaked in 2007 in nominal terms. In
2008 and 2009, foreign capital inflows dropped sharply as the financial crisis and global
economic downturn unfolded. At times, foreign investors have looked to U.S. Treasury securities
as a “safe haven” investment, while they sharply reduced their net purchases of corporate stocks
and bonds. Since the financial crisis, foreign private investments generally have outpaced foreign
official inflows, but foreign private purchases of U.S. corporate stocks and bonds generally have
not rebounded to the level experienced prior to the financial crisis. Foreign investors now hold
more than 50% of the publicly held and traded U.S. Treasury securities. The large foreign
accumulation of U.S. securities has spurred some observers to argue that this large foreign
presence in U.S. financial markets increases the risk of a financial crisis, whether as a result of the
uncoordinated actions of market participants or by a coordinated withdrawal from U.S. financial
markets by foreign investors for economic or political reasons.
Congress likely would find itself embroiled in any such financial crisis through its direct role in
conducting fiscal policy and in its indirect role in the conduct of monetary policy through its
supervisory responsibility over the Federal Reserve. Such a coordinated withdrawal seems highly
unlikely, particularly since the vast majority of the investors are private entities that presumably
would find it difficult to coordinate a withdrawal. The financial crisis and economic downturn,
however, reduced the value of the assets foreign investors acquired, which may make them more
hesitant in the future to invest in certain types of securities. As a result of the financial crisis,
foreign investors curtailed their purchases of corporate securities, a phenomenon that was not
unique to the United States. In a sense, the slowdown in the U.S. economy and the rise in the
personal rate of saving eased somewhat the need for foreign investment. The importance of
capital inflows changes in relation to the overall saving-investment balance in the economy. This
report analyzes the extent of foreign portfolio investment in the U.S. economy and assesses the
economic conditions that are attracting such investment and the impact such investments are
having on the economy.
Over the course of the 2008-2009 recession, foreign investors often favored dollar-denominated
investments due to a number of factors, including the evaluation that such investments are a “safe
haven” investment during times of uncertainty; comparatively favorable returns on investments, a
surplus of saving in other areas of the world, the well-developed U.S. financial system, and the
overall stability and relative rate of growth of the U.S. economy. Capital inflows also allow the
United States to finance its trade deficit because foreigners are willing to lend to the United States
in the form of exchanging the sale of goods, represented by U.S. imports, for such U.S. assets as
U.S. businesses and real estate, stocks, bonds, and U.S. Treasury securities. Despite
improvements in capital mobility, foreign capital inflows do not fully replace or compensate for a
lack of domestic sources of capital. Economic analysis shows that a nation’s rate of capital
formation, or domestic investment, seems to be linked primarily to its domestic rate of saving.
This report relies on a comprehensive set of data on capital flows represented by purchases and
sales of U.S. government securities and U.S. and foreign corporate stocks and bonds into and out
of the United States; the data is reported by the Treasury Department on a monthly basis.

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Contents
Introduction ...................................................................................................................................... 1
Capital Flows in the Economy ......................................................................................................... 3
Capital Flows and the Dollar ........................................................................................................... 8
Purchases and Sales of U.S. Securities .......................................................................................... 10
Purchases and Sales of U.S. Securities by Foreign Investors ........................................................ 13
Treasury Securities .................................................................................................................. 15
Corporate Stocks...................................................................................................................... 16
Corporate Bonds ...................................................................................................................... 17
Major Foreign Holdings of U.S. Long-Term Securities .......................................................... 18
Economic Implications .................................................................................................................. 21

Figures
Figure 1. Foreign Official and Private Capital Inflows to the United States, 1996-2012 ................ 3
Figure 2. Foreign Ownership Share of Publicly Held Treasury Securities, 2000-2013 ................. 10
Figure 3. Foreign Official and Private Purchases of U.S. Treasury Securities, 1997-2012 ........... 13

Tables
Table 1. Capital Inflows of the United States, 1996-2012 ............................................................... 2
Table 2. Flow of Funds of the U.S. Economy, 1996-2012 ............................................................... 5
Table 3. Saving and Investment in Selected Countries and Areas; 2004-2008, 2008-2012,
and 2013 ....................................................................................................................................... 6
Table 4. Foreign Exchange Market Turnover .................................................................................. 9
Table 5. Transactions in Long-Term U.S. Securities, 2013 ........................................................... 11
Table 6. Foreign Transactions in U.S. Securities, 2007-2013 ........................................................ 12
Table 7. Net Purchases of U.S. Domestic Securities by Foreigners .............................................. 14
Table 8. Net Foreign Purchases of Publicly Traded U.S. Treasury Securities ............................... 15
Table 9. Net Foreign Purchases of U.S. Corporate Stocks ............................................................ 16
Table 10. Net Foreign Purchases of U.S. Corporate Bonds ........................................................... 17
Table 11. Major Foreign Holdings, or Cumulative Amounts, of Long-Term U.S. Treasury
Securities .................................................................................................................................... 18
Table 12. Market Value of Foreign Holdings of U.S. Long-Term Securities,
by Type of Security ..................................................................................................................... 20

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Contacts
Author Contact Information........................................................................................................... 24

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Introduction
Foreign capital inflows play an important role in the U.S. economy by bridging the gap between
domestic supplies of and demand for capital. The importance of these flows was underscored by
the financial crisis of 2008-2009, when international capital markets essentially shut down for a
period of time. International capital flows and international capital markets also generally give the
owners of capital the ability to reduce their risk by diversifying their investments. Oversight of
these markets has changed as a result of the financial crisis. Foreign investors currently own more
than 50% of the publicly held and traded U.S. Treasury securities and hold large amounts of U.S.
corporate stocks and bonds. Capital inflows help keep U.S. interest rates below the level they
would reach without them and have allowed the nation to spend beyond its current output,
including financing its trade deficit. Some observers have expressed concerns about the extent of
these foreign holdings, because they argue that this exposure increases the overall risks to the
economy should foreign investors decide to withdraw from the U.S. financial markets for
political or economic reasons. At the same time, the funding requirements of the U.S. economy
often tempers the criticism of some foreign investors, especially if capital flows should shrink and
U.S. funding requirements increase.
Inflows of capital into the U.S. economy are not new, although they grew sporadically over the
last decade, as indicated in Table 1. By 2007, before the global economic recession, total foreign
capital inflows to the United States reached over $2 trillion. As Figure 1 shows, these capital
inflows are comprised of official inflows, primarily foreign governments’ purchases of U.S.
Treasury securities, and private inflows comprised of portfolio investment, which includes
foreigners’ purchases of U.S. Treasury and corporate securities, and financial liabilities, and direct
investment in U.S. businesses and real estate. In 2008, total foreign capital inflows totaled about
$431 billion, or down by three-fourths from 2007. In 2009, such inflows fell to $315, reflecting
the sharp slowdown in the rate of economic growth and reduced demands for foreign capital in
the economy. Private capital inflows, which generally comprise more than three-fourths of the
total capital inflows, fell to a negative $165 billion, down more than ten-fold from the $1.6
trillion they accounted for in 2007 as foreign investors pared back their holdings of corporate
securities. In 2008 and 2009, official inflows offset the net outflows by private investors. Other
private capital inflows are associated with U.S. liabilities to foreigners reported by U.S. banks and
securities firms. These accounts also registered net outflows, or negative amounts, in 2008 and
2009, mostly as a result of a large reduction in foreign banks’ deposits at banks in the United
States. Private capital inflows outpaced official inflows in 2010 and 2011, before falling behind
official inflows in 2012, primarily as a result of foreign direct investment in U.S. business and
investment in U.S. Treasury securities.
Capital flows over the past five years show that such flows are highly liquid, can respond
abruptly to changes in economic and financial conditions, and exercise a primary influence on
exchange rates and through those on global flows of goods and services. Economists generally
attribute the rise and fall in foreign investment to a number of factors, including a “safe haven”
effect during times of uncertainty; comparatively favorable returns on investments relative to risk,
a surplus of saving in other areas of the world, the well-developed U.S. financial system, and the
overall stability of the U.S. economy. Net capital inflows (inflows net of outflows) bridge the gap
in the United States between the amount of credit demanded and the domestic supply of funds,
likely help keep U.S. interest rates below the level they likely would reach without the foreign
capital. These capital inflows also allow the United States to spend beyond its means, including
financing its trade deficit, because foreigners are willing to lend to the United States in the form
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of exchanging goods, represented by U.S. imports, for such U.S. assets as stocks, bonds, and U.S.
Treasury securities.
Table 1. Capital Inflows of the United States, 1996-2012
(in billions of dollars)
Private assets
Official
Direct
Treasury
Corporate
U.S.
Total
assets
Total
investment
securities
securities
currency
Other

1996 $21.5 $10.5
$11.0 $0.9
$0.0
$4.5
$0.0
$5.6
1997 704.5 19.0
685.4 105.6 130.4
161.4
22.4
265.5
1998 420.8 -19.9
440.7 179.0
28.6
156.3
13.8
62.9
1999 742.2 43.5
698.7 289.4
-44.5
298.8
24.4
130.5
2000 1,038.2 42.8
995.5 321.3
-70.0
459.9
-3.4
287.6
2001 782.9 28.1
754.8 167.0
-14.4
393.9
23.8
184.5
2002 795.2 115.9
679.2 84.4 100.4
283.3
18.9
192.3
2003 858.3 278.1
580.2 63.8
91.5
220.7
10.6
193.7
2004 1,533.2 397.8
1,135.4 146.0
93.6
381.5
13.3
501.1
2005 1,247.3 259.3
988.1 112.6
132.3
450.4
8.4
284.3
2006 2,065.2 487.9
1,577.2 243.2
-58.2
683.2
2.2
706.8
2007 2,064.6 481.0
1,583.6 221.2
66.8
605.4
-10.7
700.8
2008 431.4 554.6
-123.2 310.1 162.9
-165.6
29.2
-459.8
2009 315.1 480.3
-165.2 150.4
-15.5
1.9
12.6
-314.7
2010 1,333.9 398.3
935.6 205.9
298.3
140.9
28.3
262.2
2011 969.0 253.8
715.2 230.2 188.0
-54.5
55.0
296.4
2012 543.9 393.9
150.0 166.4 156.4
196.9
57.1
-426.9
Source: Scott, Sarah P. U.S. International Transactions, Third Quarter 2013, Survey of Current Business, January
2014.
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Figure 1. Foreign Official and Private Capital Inflows to the United States, 1996-2012

Source: Department of Commerce.
Capital Flows in the Economy
Table 2 shows the net flow of funds in the U.S. economy. The flow of funds accounts measure
financial flows across sectors of the economy, tracking funds as they move from those sectors that
supply the sources of capital through intermediaries to sectors that use the capital to acquire
physical and financial assets.1 The net flows show the overall financial position by sector,
whether that sector is a net supplier or a net user of financial capital in the economy. Since the
demand for funds in the economy as a whole must equal the supply of funds, a deficit in one
sector must be offset by a surplus in another sector. Generally, the household sector, or
individuals, provides funds to the economy, because individuals save part of their income, while
the business sector uses those funds to invest in plant and equipment that, in turn, serve as the
building blocks for the production of additional goods and services. The Government sector (the
combination of federal, state, and local governments) can be either a net supplier of funds or a net
user depending on whether the sector is running a surplus or a deficit, respectively. The interplay
within the economy between saving and investment, or the supply and uses of funds, tends to
affect domestic interest rates, which move to equate the demand and supply of funds. Shifts in the
interest rate also tend to attract capital from abroad, denoted by the rest of the world (ROW) in
Table 2.
As Table 2 indicates, from 1996 through 1999 and from 2007 through 2012, the household sector
ran a net surplus, or provided net savings to the economy. The business sector also provided a net
surplus of funds to the economy at various times, or businesses earned more in profits than they
invested. The government sector, primarily the federal government, experienced net deficits,
which decreased until 1998, when the federal government and state and local governments

1 Teplin, Albert M., the U.S. Flows of Funds Accounts and Their Uses, Federal Reserve Bulletin, July 2001.
pp. 431-441.
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experienced financial surpluses. Capital inflows from the rest of the world rose and fell during
this period, depending on the combination of household saving, business sector saving and
investment, and the extent of the deficit or surplus in the government sector.
Starting in 2000, the household sector began dissaving, as individuals spent more than they
earned. Part of this dissaving was offset by the government sector, which experienced a surplus in
2000. As a result of the large household dissaving, however, the economy as a whole experienced
a gap between domestic saving and investment that was filled with capital inflows. Those inflows
varied in size in nominal terms from 2000 to 2006 as households experienced periods of both
saving and dissaving and government sector surpluses turned to deficits.
On a balance of payments basis, capital inflows in 2009 were $240, less than one-third of the
$730 billion recorded in 2008. This drop in capital inflows reflected a sharp reversal in the
behavior of households over the 2007-2012 period from dissaving to saving, an increase in
business sector dissaving, and an increase in the deficits experienced by state and local
governments as the effects of the economic slowdown became more pronounced. Households
turned from a dissaving of $298 billion in 2006 to a net saving of $846 billion in 2008 and $1.4
trillion in 2011, reflecting tight credit conditions, a sharp drop in household wealth, and concerns
among households over the state of the economy. The Federal Reserve reported that in 2008,
households experienced a drop in their net worth from $65 trillion to $55 trillion, or about 150%.
By the end of the second quarter of 2013, household net worth had grown by about $20 trillion
from the end of 2009 to reach $77 trillion.2

2 Board of Governors of the Federal Reserve System, Financial Accounts of the United States, Flow of Funds Balance
Sheets, and Integrated Macroeconomic Accounts, various issues.
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Table 2. Flow of Funds of the U.S. Economy, 1996-2012
(in billions of dollars)
Government
State and
Year Households Businesses Total
Local
Federal
ROW
1996 $283.2 $10.7
-$232.7
-$29.8
-$202.9
$736.6
1997 232.1
-64.4
-95.2
-8.2
-87.0
617.6
1998 262.4
-98.1 5.5
13.9
-8.3
807.4
1999 16.2
-81.5
34.8
-43.6
78.4
713.8
2000 -263.2
-100.4
146.4 -0.7
147.1
535.4
2001 47.9
28.2
-101.7
-89.2
-12.5
531.1
2002 -62.0 -0.8
-535.3
-193.4
-342.0
500.4
2003 109.7 18.5
-728.4
-197.5
-530.9
413.5
2004 235.3 97.2
-632.2
-158.1
-474.1
477.7
2005 -191.3 -84.8
-400.4
22.4
-422.8
234.0
2006 -298.1
-211.7
-319.9 -9.5
-310.4
64.0
2007 267.2
-275.6
-460.1
-69.5
-390.6
218.7
2008 846.5
-992.8
-1,123.6
-334.6
-789.0
134.5
2009 836.5
569.8
-1,732.5
-434.2
-1,298.3
230.9
2010 1,191.4 164.1
-1,727.2
-311.2
-1,416.0
437.9
201I 1,361.0
-397.8
-1,684.9
-329.4
-1,355.5
550.0
2012 981.5
219.1
-1,371.4
-245.8
-1,125.6
446.3
Source: Board of Governors of the Federal Reserve System, Financial Accounts of the United States, Flow of
Funds Balance Sheets, and Integrated Macroeconomic Accounts, various issues.
Foreign capital inflows augment domestic U.S. sources of capital, which, in turn, keep U.S.
interest rates lower than they would be without the foreign capital. Indeed economists generally
argue that it is this interplay between the demand for and the supply of credit in the economy that
drives the broad inflows and outflows of capital. As U.S. demands for capital outstrip domestic
sources of funds, domestic interest rates rise relative to those abroad, which tends to draw capital
away from other countries to the United States. During periods of uncertainty, foreign investors
often turn to U.S. Treasury securities as a “safe haven” investment, as was the case at times in
2008 and 2009.
The United States also has benefitted from a surplus of saving over investment in many areas of
the world that has provided a supply of funds and accommodated the overall shortfall of saving in
the country. This surplus of saving has been available to the United States, because foreigners
have remained willing to loan that saving to the United States in the form of acquiring U.S.
assets, which have accommodated the growing current account deficits. Over the past half-
decade, the United States experienced a decline in its overall rate of saving and an increase in the
rate of domestic investment expressed as a share of national gross domestic product (GDP), as
indicated in Table 3. The large increase in the nation’s current account deficit would not have
been possible without the accommodating inflows of foreign capital.
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Table 3. Saving and Investment in Selected Countries and Areas;
2004-2008, 2008-2012, and 2013
(percentage of Gross Domestic Product)
Average,
Average,
Area/Country
2004-2008
2008-2012 2013 Change
World


Saving
23.5
24.2
25.1
0.9
Investment
22.2
23.8
24.7
0.9
United States


Saving
14.6
15.4
16.7
1.3
Investment
19.6
18.8
19.4
0.6
Other Advanced Economies


Saving
20.3
19.4
19.7
0.3
Investment
21.2
20.0
19.7
-0.3
Eurozone

Saving
21.8
20.2
20.4
0.2
Investment
21.4
19.6
17.9
-1.7
Japan


Saving
27.4
23.2
21.9
-1.3
Investment
23.5
20.6
20.7
0.1
Emerging Developing Economies


Saving
32.4
33.1
33.5
0.4
Investment
28.5
31.3
32.8
1.5
Developing
Asia

Saving
42.6
44.4
44.5
0.1
Investment
37.4
41.6
43.5
1.9
Middle
East

Saving
40.7
37.1
35.5
-1.6
Investment
25.2
28.1
26.5
-1.6
Source: World Economic Outlook, International Monetary Fund, October 2013, Table A-15.
Note: the change indicated in the final column represents the change between the value of the respective line in
2013 and the average amount in the preceding five-year period.
As Table 3 indicates, compared with the 2008-2012 period, world saving and investment in 2013
increased by 0.9% of GDP. The shift toward less saving relative to investment in 2008-2012
compared with the previous period reflected the far-reaching impact of the economic recession on
the performance of economies world-wide. Similarly, in the United States both saving and
investment increased, although saving as a share of GDP increased more than investment,
reducing its demand on global funds. Among other advanced economies saving increased in 2013
compared with the previous five-year period and investment fell as other developed economies in
Europe and Asia experienced a slowdown in their rate of economic growth. In the emerging
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developing economies of Asia investment increased at a faster rate than saving in 2013 compared
with the previous five-year period. In the Middle East, both saving and investment in 2013 fell
compared with the previous five-year period, although saving still outstripped investment,
continuing to supply an excess amount of saving to the rest of the world. Similarly, the
developing economies of Asia (which includes China) continued to save more than they invested
in 2013 compared with the previous period, which served as one source of excess saving to the
rest of the world.
Capital inflows allow the United States to finance its trade deficit, because foreigners are willing
to lend to the United States in the form of exchanging the sale of goods, represented by U.S.
imports, for such U.S. assets as businesses and real estate (referred to as direct investment), and
stocks, bonds, and U.S. Treasury securities. In 2008 and 2009, the value of many of those assets
dropped sharply, as the financial crisis eroded the value of financial assets and the economic
downturn reduced profits and the value of on-going businesses. Capital inflows, however, put
upward pressure on the dollar, which tends to push up the price of U.S. exports relative to imports
and to reduce the overall level of exports. Furthermore, foreign investment in the U.S. economy
drains off some of the income earned on the foreign-owned assets that otherwise would accrue to
the U.S. economy as foreign investors repatriate their earnings.
Some observers are particularly concerned about the long-term impact of the U.S. position as a
net international investment debtor on the pattern of U.S. international income receipts and
payments.3 In 2012, the United States received $770 billion in income receipts on its investments
abroad and paid out $538 billion in income payments on foreign-owned assets in the United
States for a net surplus of $132 billion in income receipts, down slightly from the net surplus in
income receipts experienced in 2011. Considering the overall negative balance of the U.S. net
investment position, it is surprising that the net surplus of income receipts continues to be
positive. As the annual amount of foreign investment in the U.S. economy continues to exceed the
amount of U.S. investment abroad, however, it seems inevitable that U.S. payments on foreign-
owned assets will rise relative to U.S. receipts. A net outflow of income payments would act as a
drag on the national economy as U.S. national income is reduced by the net amount of funds that
are channeled abroad to foreign investors.
Foreign capital inflows, while important, do not fully replace or compensate for a lack of
domestic sources of capital. Capital mobility has increased sharply over the last twenty years, but
economic analysis shows that a nation’s rate of capital formation, or domestic investment, seems
to be linked primarily to its domestic rate of saving. This phenomenon was first presented in a
paper published in 1980 by Martin Feldstein and Charles Horioka.4 The Feldstein-Horioka paper
maintained that despite the dramatic growth in capital flows between nations, international capital
mobility remains somewhat limited so that a nation’s rate of domestic investment is linked to its
domestic rate of saving.5

3 CRS Report RL32964, The United States as a Net Debtor Nation: Overview of the International Investment Position,
by James K. Jackson.
4 Feldstein, Martin, and Charles Horioka, Domestic Saving and International Capital Flows, The Economic Journal,
June, 1980, pp. 314-329; Feldstein, Martin, Aspects of Global Economic Integration: Outlook for the Future. NBER
Working Paper 7899, September 2000, pp. 9-12.
5 Developments in capital markets have improved capital mobility since the Feldstein-Horioka paper was published and
have led some economists to question Feldstein and Horioka’s conclusion concerning the lack of perfect capital
mobility. (Ghosh, Atish R., International Capital Mobility Amongst the Major Industrialized Countries: Too Little or
Too Much?, The Economic Journal, January 1995, pp. 107-128.) Indeed, some authors argue that short-term capital
(continued...)
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Capital Flows and the Dollar
Another aspect of capital mobility and capital inflows is the impact such capital flows have on the
international exchange value of the dollar. Demand for U.S. assets, such as financial securities,
translates into demand for the dollar, since U.S. securities are denominated in dollars. As demand
for the dollar rises or falls according to overall demand for dollar-denominated assets, the value
of the dollar changes. These exchange rate changes, in turn, have secondary effects on the prices
of U.S. and foreign goods, which tend to alter the U.S. trade balance. At times, foreign
governments have moved aggressively in international capital markets to acquire the dollar
directly or to acquire Treasury securities in order to strengthen the value of the dollar against
particular currencies. In other cases, some foreign countries have pegged the international
exchange value of their currencies to the dollar.
Also, the dollar is heavily traded in financial markets around the globe and, at times, plays the
role of a global currency. Disruptions in this role have important implications for the United
States and for the smooth functioning of the international financial system. This prominent role
means that the exchange value of the dollar often acts as a mechanism for transmitting economic
and political news and events across national borders. While such a role helps facilitate a broad
range of international economic and financial activities, it also means that the dollar’s exchange
value can vary greatly on a daily or weekly basis as it is buffeted by international events.6 A
triennial survey of the world’s leading central banks conducted by the Bank for International
Settlements in April 20137 indicates that the daily trading of foreign currencies through
traditional foreign exchange markets8 totals $5.3 trillion, after adjusting for double-counting up
36% from the $4.0 trillion reported in the previous survey conducted in 2010, as indicated in
Table 4. In addition to the traditional foreign exchange market, the over-the-counter (OTC)9
foreign exchange derivatives market reported that daily turnover of interest rate and non-
traditional foreign exchange derivatives contracts reached $2.0 trillion in April 2013. The
combined amount of $7.3 trillion for daily foreign exchange trading in the traditional and OTC
markets is more than three times the annual amount of U.S. exports of goods and services. The
data also indicate that 87.0% of the global foreign exchange turnover in April 2013 was in U.S.
dollars, slightly higher than the 84.9% share reported in a similar survey conducted in 2010.

(...continued)
flows among the major developed economies are highly liquid, perhaps too liquid, and seem to be driven as much by
short-term economic events and speculation as they are by longer term economic trends.
6 Samuelson, Robert J., Dangers in a Dollar on the Edge. The Washington Post, December 8, 2006. p. A39.
7 Rime, Dagfinn, and Andreas Schrimpf, the Anatomy of the Global FX Market Through the Lens of the 2013 Triennial
Survey, BIS Quarterly Review, Bank for International Settlements, December 2013.
8 Traditional foreign exchange markets are organized exchanges which trade primarily in foreign exchange futures and
options contracts where the terms and condition of the contracts are standardized.
9 The over-the-counter foreign exchange derivatives market is an informal market consisting of dealers who custom-
tailor agreements to meet the specific needs regarding maturity, payments intervals or other terms that allow the
contracts to meet specific requirements for risk.
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Table 4. Foreign Exchange Market Turnover
(daily averages in April of the year indicated, in billions of U.S. dollars)

1998 2001 2004 2007 2010 2013
Foreign Exchange Market Turnover
Instrument






Spot
transactions
568 386 631 1,005 1,490 2,046
Outright
forwards
128 130 209 362 475 680
Foreign
exchange
swaps
734 656 954 1,714 1,765 2,228
Reporting
gaps
61 28 107 129 NA NA
Total
“traditional”
turnover
1,527 1,239 1,934 3,324 3,981 5,345
Over the Counter Derivatives Market Turnover
Foreign exchange instruments
97
87
140
291
NA

Interest
rate
instruments
265 489 1,025 1,686 2,054 2,343
Reporting gaps
13
19
55
113
NA

Total
OTC
turnover
375 575 1,220 1,990 2,083 2,343
Total
market
turnover
1,865 1,775 3,100 5,300 6,064 7,688
United States






Foreign exchange turnover
351
254
499
746
864
1,263
OTC
derivatives
turnover
91 135 318 526 614 628
Total

442 389 817 1,272 1,478 1,891
Source: Triennial Central Bank Survey: Foreign Exchange Turnover in April 2013: Preliminary Global Results,
Bank for International Settlements, September 2013; The Foreign Exchange and Interest Rate Derivatives
Markets: Turnover in the United States, April, 2013, Federal Reserve Bank of New York.
In the U.S. foreign exchange market, the value of the dollar is followed closely by multinational
firms, international banks, and investors who are attempting to offset some of the inherent risks
involved with foreign exchange trading. On a daily basis, turnover in the U.S. foreign exchange
market10 averages $1.3 trillion, an increase of 46% over similar transactions recorded in the 2010
survey. Similar transactions in the U.S. foreign exchange derivative markets11 averages $628
billion per day in 2013, up slightly from the daily average of $614 billion reported in a similar
survey conducted in 2010. Foreigners also buy and sell U.S. corporate bonds and stocks and U.S.

10 Defined as foreign exchange transactions in the spot and forward exchange markets and foreign exchange swaps. A
spot transaction is defined as a single transaction involving the exchange of two currencies at a rate agreed upon on the
date of the contract; a foreign exchange swap is a multi-part transaction which involves the exchange of two currencies
on a specified date at a rate agreed upon at the time of the conclusion of the contract and then a reverse exchange of the
same two currencies at a date further in the future at a rate generally different from the rate applied to the first
transaction.
11 Defined as transactions in foreign reserve accounts, interest rate swaps, cross currency interest rate swaps, and
foreign exchange and interest rate options. A currency swap commits two counterparties to exchange streams of
interest payments in different currencies for an agreed upon period of time and usually to exchange principal amounts
in different currencies as a pre-agreed exchange rate; a currency option conveys the right to buy or sell a currency with
another currency as a specified rate during a specified period.
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Treasury securities. Foreigners now own about 53% of the total amount of outstanding U.S.
Treasury securities that are publicly held and traded, as indicated in Figure 2.12
Figure 2. Foreign Ownership Share of Publicly Held Treasury Securities, 2000-2013

Source: Treasury Bulletin, U.S. Department of the Treasury.
Purchases and Sales of U.S. Securities
A comprehensive set of data on capital flows, represented by purchases and sales of U.S.
government securities and U.S. and foreign corporate stocks, bonds, into and out of the United
States is published by the Treasury Department on a monthly basis.13 These data represent cross-
border flows and positions between U.S. residents and foreign residents and include monthly data
on transactions in long-term securities, monthly and quarterly data on long- and short-term
securities reported by banks and securities brokers, annual position data on holdings of long-term
and short-term securities, and comprehensive benchmark surveys. Cross-border transactions
consist of only those transactions that involve both a U.S. seller and a foreign purchaser; they
exclude transactions between strictly U.S. buyers and sellers and foreign buyers and sellers. The
data also capture only those transactions that involve a defined panel of custodians (banks and
other depository institutions, securities brokers and dealers, end-investors, security issuers, and
nonfinancial institutions) above a certain threshold amount, specifically cross-border transactions
of at least $50 million per month. The custodial basis of the transactions means that some
attribution of data to specific countries may distort the holdings data, because some foreign
owners entrust the safekeeping of their securities to such financial centers as Belgium, the
Caribbean banking centers, Luxembourg, Switzerland, and the United Kingdom, which would

12 Treasury Bulletin, December 2013. Table OFS-, p. 52.
13 These data are available through the World Wide Web at Treasury Department’s Treasury International Capital
(TIC) reporting site: http://www.treas.gov/tic/.
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inflate the holdings of these custodians, rather than be attributed to the actual foreign owner. The
data in the following tables reflect annualized monthly transactions in long-term securities.14
As the data in Table 5 show, foreign investors buy and sell large amounts of U.S. financial assets,
although the annual accumulation, though large in nominal dollar amounts, is generally small in
relative terms when compared with the large amounts of assets that are traded. In 2013, foreigners
purchased over $35.7 trillion dollars in U.S. financial assets and sold $35.8 trillion dollars in
assets, for a net decrease in holdings of $137 billion in financial assets, primarily as a result of net
sales of foreign bonds and stocks.
Marketable U.S. Treasury securities generally account for one of the largest shares of U.S.
securities that are traded by foreign investors, whether measured in terms of the total amount of
securities that are bought and sold, or in terms of the net annual accumulation of financial assets.
The low risk associated with these securities makes them highly desired, especially during
periods of market uncertainty. In 2013, foreign trading in Treasury securities accounted for about
half of all the U.S. securities traded by foreign investors during the year, and the net amount of
Treasury securities that were accumulated comprise the second largest category of securities that
were accumulated during the year, behind the net purchases of other types of U.S. government
bonds, and reflects the impact the financial crisis and the economic recession had on foreign
investor’s appetite for such other types of investments as corporate stocks and bonds. Demand for
Treasury securities often remains strong during uncertain times as a “safe haven” investment,
including during the financial crisis of 2008-2009 and the period following the terrorist attacks of
September 11, 2001, when important elements of the U.S. financial system were temporarily shut
down.15
Table 5. Transactions in Long-Term U.S. Securities, 2013
(in billions of dollars)
Marketable
U.S. Govt.
Corporate
Corporate
Foreign
Foreign
Total
Treasury Securities
Bonds
Bonds
Stocks
Bonds
Stocks
Gross Purchases by Foreigners
$35,713.6 $17,568.2 $1,377.8 $934.9 $7,677.0 $4,316.7
$3,839.0
Gross Sales by Foreigners
35,850.9 17,525.3 1,315.7 919.3 7,717.3 4,360.3
4,013.0
Net Purchases by Foreigners
-137.3 42.9 62.1 15.6 -40.2
-43.6
-174.0
Source: Treasury Department International Capital data system, February, 2014.
Table 6 shows gross purchases, gross sales, and net sales of publicly traded long-term U.S.
Treasury securities, corporate stocks, and corporate bonds over the seven-year period 2007
through 2013. At nearly $17.6 trillion, Treasury securities were the most heavily traded of the
three kinds of securities in 2013. From 1997 to 2001, foreign official and private net acquisitions
of Treasury securities plummeted as the Federal government used its budget surpluses to retire

14 Bertaut, Carol C., William L. Griever, and Ralph W. Tryon, Understanding U.S. Cross-Border Securities Data,
Federal Reserve Bulletin, 2006. p. A59-A75.
15 For additional information, see CRS Report RS21102, International Capital Flows Following the September 11
Attacks, by James K. Jackson.
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large amounts of securities, as indicated in Figure 3. The Federal government’s budget deficits
from 2002 through 2013, however, provided new opportunities for foreign investors to build up
their holdings of Treasury securities.
Table 6. Foreign Transactions in U.S. Securities, 2007-2013
(in billions of dollars)
2007 2008 2009 2010 2011
2012 2013
Treasury Securities
Purchases $15,127.5 $14,629.2 $11,593.2 $16,189.9
$17,969.9 $14,795.0 $17,568.2
Sales
14,929.6 14,314.3 11,054.8 15,486.2
17,537.3 14,378.5 17,525.3
Net
198.0 314.9 538.4 703.7
432.6 416.4 42.9
Corporate Stocks
Purchases 10,639.3 12.037.9 6,654.0 6,747,2
7,720.3 7,408.6 7,677.0
Sales 10,443.8
11,993.1
6,501.2
6,637.5 7,695.2
7,299.8
7,717.3
Net 195.5
44.8
152.7
109.7 25.1
108.8
-40.2
Corporate Bonds
Purchases 1,913.3 1,467.5 1,189.4
971.2
996.1 870.1 934.9
Sales
1,520.0 1,373.6 1,230.2
984.4
1,041.3 894.2 919.3
Net 393.4
93.9
-40.8
-13.2
-45.2
-24.1
15.6
Source: Treasury Department International Capital data system, February, 2014.
As Figure 3 indicates, foreign private purchases of Treasury securities turned negative between
1998 and 2001 and again in 2006 and 2009 as foreign private investors experienced net sales of
Treasury securities. From 2002 to 2006 and again in 2007 to 2012 9except for 2009), foreign
private investors returned to acquiring Treasury securities. In contrast, foreign official net
acquisitions of Treasury securities have been strong since 2004 and generally outpaced foreign
private purchases through 2012. Official purchases were particularly strong between 2008, where
they reached $549 billion, or triple the amount of private foreign purchases, and 2010, where they
totaled $442 billion, more than 25% above the $300 billion in private foreign purchases. In 2012,
foreign official purchases totaled more than $430 billion, eclipsing the $156 billion in foreign
private purchases. Often, the purchases of Treasury securities by foreign governments are directed
at least in part to shore up the international exchange value of the dollar. Through the first three
quarters of 2013, foreign private investors purchased $108 billion in Treasury securities, an
amount that could rise to match the $156 billion in Treasury securities foreign private investors
acquired in 2012. During the same three quarters, foreign official purchases totaled $122 billion,
a pace that is unlikely to rise to half the $433 billion purchased in 2012.
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Figure 3. Foreign Official and Private Purchases of U.S. Treasury Securities,
1997-2012

Source: Department of Commerce.
Generally, the nominal amount of total purchases and sales of corporate bonds on an annual basis
is much lower than that for Treasury securities. At times, however, the net accumulation of
corporate bonds has surpassed that of Treasury securities, as was the case from 2005-2007. The
financial crisis and the economic recession, however, have reduced net foreign acquisitions in
corporate stocks and bonds and corporate profits have declined and uncertainty concerning the
economic recovery tested investors’ confidence. Generally, corporate bonds are attractive to
investors when interest rates are low, since the price of a bond is inversely related to the interest
rate, so lowering interest rates raises the price of a bond and makes the bond more valuable. Net
accumulations of corporate stocks have been the most volatile of the three groups of securities
over the decade. High levels of stock accumulation at the beginning and end of the period may
well reflect low levels of accumulation of Treasury securities and a rise in stocks prices that
marked those periods. Economic uncertainties and lower rates of national economic growth,
however, characterized the years during the middle part of the 2000-2010 period.
Purchases and Sales of U.S. Securities by
Foreign Investors
Some foreign investors are more active in U.S. securities markets—U.S. Treasury securities, U.S.
corporate stocks and bonds—than are others. Over the period from 2007 through 2013, foreign
investors are estimated to have accumulated about $4.2 trillion in U.S. securities. As Table 7
indicates, the United Kingdom is estimated to have accumulated about $2 trillion in U.S.
securities over the seven-year period.
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Table 7. Net Purchases of U.S. Domestic Securities by Foreigners
(in billions of dollars)
2007 2008 2009 2010 2011 2012 2013 Total
Total
$1,005.8 $414.9 $638.9 $908.3 $493.4 $634.1 $80.3
$4,175.6
Total Europe
551.9 223.4 246.3 377.2 110.4 199.6 78.4
1,787.2
France
20.2 -21.9 27.0 23.8 57.1 93.8 71.3 271.3
Germany
2.8
-17.0 -3.1 13.3 2.8 7.7 1.0 7.5
Italy
-6.0 -2.5 2.7 -1.5 2.1 -2.2 -4.7 -12.1
Netherlands
7.1 -7.9 2.2 -8.9 -4.4 -5.1 -2.4 -19.4
Sweden
3.7 -1.7 5.0 2.0 -3.5 -2.8 1.2 4.0
Switzerland
-4.3 16.5 18.4 23.5 2.6 65.2 -23.2 98.7
United
Kingdom 546.6 328.7 212.7 376.5 133.3 126.4 122.9
1,847.2
Canada
21.4 13.5 48.6 94.5 33.8 75.7 -4.7 282.8
Latin America
83.7 -78.4 24.5 70.2 57.3 55.6
-130.3 82.5
Mexico
5.2 0.3 4.4 2.4 8.0 22.9
-21.2 21.8
Asia
234.5 250.7 315.9 331.4 197.6 240.6 154.8
1,725.4
China
110.9 130.4 98.8 24.3 -25.7 84.6 166.9 590.1
Hong
Kong
80.9 65.2 18.5 24.1 16.3 -3.0 -23.1 178.9
Indonesia
4.2 -5.7 -3.4 5.1 3.8 3.4 -2.8 4.6
Japan
-0.3 57.3 128.2 200.8 197.9 103.0 -4.3 682.6
Korea
5.5
-24.1 23.9 5.3 0.6 14.9 4.0 30.1
Malaysia
5.8 1.5 1.7 3.5 2.9 3.7 -1.3 17.9
Philippines
3.4 -2.0 -0.3 3.0 3.1 2.8 3.3 13.4
Singapore
6.2 -2.8 11.3 17.6 -2.0 5.4 -9.5 26.2
Taiwan
-8.1 10.1 29.1 34.1 2.5 13.9 19.8 101.5
Thailand
1.4 -2.5 3.9 16.9 -0.4 1.5 -2.4 18.5
Australia
9.6 -2.7 6.2 -5.9 -1.7 7.6 5.1 18.4
Source: Developed by CRS from the Treasury Department’s International Capital data system. February, 2014.
A large accumulation of securities by British investors is not surprising given the long historical
involvement of British investors in the U.S. economy. Other foreign investors have started
acquiring U.S. securities more recently. Some, such as Chinese investors, have moved rapidly to
become major investors in some U.S. securities markets. In terms of the overall value of their
holdings, British investors are followed by Japanese investors with $682 billion in securities
holdings. Chinese investors were the third most active investors in U.S. securities with about
$590 billion accumulated in U.S. securities during the 2007-2013 period. Following China,
Canada ($283 billion), France ($271), Hong Kong ($179 billion), Taiwan ($101 billion), and
Switzerland ($98.7 billion) accumulated the largest amounts of U.S. securities over the 2007-
2013 period.
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Treasury Securities
As previously indicated, foreign investors are active participates in the U.S. Treasury securities
market. Over the seven-year period of 2007-2013, foreign investors acquired on net (purchases
less sales) about $2.6 trillion dollars in Treasury securities, as indicated in Error! Reference
source not found.. The United Kingdom acquired an estimated $1.2 trillion in U.S. publicly held
and traded Treasury securities over the 2007-2013 period, followed by Japan, which accumulated
$507 billion during the period. China, a recent participant in the U.S. Treasury securities market
accumulated the third largest amount of these securities with $359 billion in holdings. Most of
China’s holdings were acquired during 2008-2010. Canada ($190 billion) accumulated the next
largest amount of Treasury securities, followed by Switzerland ($80 billion).
Table 8. Net Foreign Purchases of Publicly Traded U.S. Treasury Securities
(in billions of dollars)
2007 2008 2009 2010 2011 2012 2013 Total
Total
$198.0 $314.9 $538.4 $703.7 $432.6 $416.4 $42.9 $2,646.8
Total Europe
177.3 195.6 206.5 352.2 229.6 148.6 55.2 1,365.0
France
-7.8 -15.4 17.8 -5.8 84.5 84.2 82.6 240.0
Germany
-3.5 0.6 -1.3 13.2 4.3 7.1 -1.9 18.4
Italy
-1.5 0.7 2.8 1.0 0.9 0.7 -0.6 3.9
Netherlands
1.5 -4.8 1.4 -1.4 0.2 -1.7 -2.1 -7.0
Sweden
2.2 -3.1 4.6 2.2 3.8 -4.4 -1.8 3.4
Switzerland
-2.6 1.1 15.8 19.5 6.2 52.9 -13.3 79.7
United
Kingdom
208.6 188.6 171.0 341.8 156.9 98.4 61.5 1,226.9
Canada
-1.9 -6.4 41.2 78.7 17.7 56.6 4.6 190.5
Latin America
2.3 28.0 6.6 10.6 -4.5 -5.3
-116.3 -78.7
Mexico 1.5
-7.1
9.7
-2.0
-4.5
26.2
-10.9
12.9
Asia
-69.3 99.0 280.4 235.9 108.1 167.0 109.4 930.7
China
-8.0 84.7
123.5 51.2
-47.0 73.2 81.1 358.7
Hong Kong
2.0
6.2
-0.9
8.7
9.7
-0.1
-18.0
7.7
Indonesia 4.5
-5.9
-3.6
5.1
3.1
0.5
-2.5
1.1
Japan
-48.7
6.1 129.5 124.1 148.5 86.3 61.6 507.5
Korea
-17.9 -11.2 7.7 -3.2 -4.6 1.3 -2.9 -30.7
Malaysia
0.4 -0.9 2.0 -0.1 4.1 -0.7 -4.2 0.6
Philippines
3.1 -2.1 0.0 2.8 5.6 2.3 3.6 15.2
Singapore
2.5 -6.9 5.2 15.2 2.4 0.7 -11.6 7.5
Taiwan
-8.3 5.8 7.8 14.9 -5.8 0.0 -4.1 10.4
Thailand
0.8 -2.9 4.8 18.3 -0.7 1.1 -1.7 19.8
Australia
-1.4 -3.0 2.6 -5.6 1.5 6.6 3.6 4.3
Source: Developed by CRS from the Treasury Department’s International Capital data system, February, 2014.
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Corporate Stocks
Net foreign acquisitions of U.S. corporate stocks fell sharply in 2008, 2011, and 2013, after
reaching a record high in 2007, as foreign investors acquired $195 billion in corporate stocks, as
indicated in Table 9. During the 2007-2013 period, foreign investors acquired $596 billion in
U.S. corporate securities. Such investments were strong in 2009, 2010 and 2012 as the U.S. stock
market revived from the sharp drop in market indexes experienced during the financial crisis in
2008. British investors are by far the largest investors in U.S. corporate stocks, with estimated
holdings acquired over the 2007-2013 period totaling $202 billion, reflecting the interdependence
between the U.S. and U.K. financial markets. Over 2007-2013, Hong Kong ($82 billion), Canada
($45.7 billion), and France ($21.4 billion), and were the next three largest foreign acquirers of
U.S. corporate stocks. Switzerland ($25.7 billion), Sweden ($13 billion), and Australia ($10.7) are
the next largest net accumulation of U.S. corporate stocks during 2007-2013.
Table 9. Net Foreign Purchases of U.S. Corporate Stocks
(in billions of dollars)
2007
2008
2009 2010 2011
2012 2013
Total
Total
195.5 44.8 152.7 109.7 25.1 108.8 -40.2 596.4
Total Europe
89.3 11.6 68.4 54.1 -32.4 72.6 6.4 270.0
France
19.5 -7.2 0.2 19.6
-26.6 15.7 0.1 21.4
Germany
0.6
-19.6 0.8 -0.4 2.1 3.3 1.0
-12.2
Italy -4.3
-2.1
-0.3
-3.1
1.7
-2.3
-0.9
-11.2
Netherlands
6.9
-1.7 3.3 -5.7 -2.2 -3.7 0.6 -2.5
Sweden
0.3 5.2 3.5 1.7 -3.6 2.5 3.3 12.8
Switzerland
-3.0 5.5 8.7 7.6 -4.3 11.6 -0.4 25.7
United
Kingdom
69.5
30.9 33.7 27.8 3.0 34.2 2.7 201.8
Canada
8.1 7.2 -1.6 6.5 14.1 14.7 -3.2 45.7
Latin America
48.6
-42.8 35.5 24.2 31.8 14.3
-19.0 92.5
Mexico
0.1 0.5 2.1 2.6 1.6 3.2 0.7 10.9
Asia
44.0 69.3 42.8 18.1 8.5 -2.3 -29.6 150.8
China
4.0 -0.7 4.0 2.8 0.4 -1.5 2.8 11.8
Hong Kong
35.4
27.4
6.3
9.8
6.5
0.1
-3.9
81.6
Indonesia
-0.1
0.0 0.0 -0.1 0.1 -0.1 0.3 0.2
Japan -5.0
23.0
13.8
4.6
3.4
-8.1
-26.4
5.3
Korea
0.1
2.8 1.7 0.3
-0.1 0.9 2.2 7.8
Malaysia
0.3
0.0 0.2 0.3 0.3 1.9 1.3 4.3
Philippines
0.0
0.1 0.0 0.0
-0.1 0.0
-0.1 0.0
Singapore
-2.5
7.1 12.0 -4.4
-6.7 -0.9
-3.8 0.7
Taiwan
0.1
0.1 1.2 0.3
-0.5 1.0
-1.2 1.1
Thailand
0.0 0.0 0.0 0.1 -0.1 -0.1 -0.3 -0.4
Australia 4.8
0.1
3.0
2.0
0.3
1.0
-0.6
10.7
Source: Developed by CRS from the Treasury Department’s International Capital data system. February, 2014.
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Corporate Bonds
As Table 10 indicates, foreign investors generally reduced their holdings of U.S. corporate bonds
over the 2007-2013 period, but did accumulate about $380 billion in such securities during the
seven-year period. A large share of these accumulations is concentrated among a few large
holders. For instance, British investors accounted for over half of the net foreign purchases of
U.S. corporate bonds during the 2007-2013 period, with an estimated accumulation of $199
billion over the period. Chinese investors trail behind their British counterparts, but acquired an
estimated $85 billion in corporate bonds in the 2007-2013 period. Japan ($77 billion), Canada
($32 billion), Hong Kong ($23 billion), Switzerland ($32 billion), Singapore ($25 billion), and
Taiwan ($24 billion) are estimated to be the next largest foreign acquires in U.S. corporate bonds
during the 2007-2013 period. Investors in Europe sold a net amount of $42 billion in U.S.
corporate bonds over the 2007-2013 period, reflecting the European sovereign debt crisis.
Table 10. Net Foreign Purchases of U.S. Corporate Bonds
(in billions of dollars)
2007 2008 2009 2010 2011 2012 2013 Total
Total 393.4
93.9
-40.8
-13.2
-45.2
-24.1
15.6
379.7
Total Europe
207.5 -5.4 -52.4 -46.1
-71.1
-46.0
-28.6 -42.1
France
4.3 -2.0 -3.9 -6.4
-9.1 -5.6 -9.4 -32.1
Germany 5.4
5.4
-1.7
-3.0
-3.8
-3.2
0.3
-0.6
Italy
-0.1 0.2 0.1 0.2
-0.2
-0.6
-2.9 -3.3
Netherlands
-0.7 -0.3 -1.7 -1.7
-2.8 0.6 -0.6 -7.3
Sweden
1.7 -0.5 -1.8 -1.7
-3.0 -0.7 -0.2 -6.4
Switzerland 3.6
11.9
-1.5
-0.3
0.3
0.1
-7.3
6.8
United
Kingdom
209.0 31.6 -12.3 -10.9
-23.7
-10.8 16.3 199.2
Canada
12.3 7.2 6.8 1.6
-1.4
-0.8 6.0 31.6
Latin America
41.7 22.6 2.8 21.6
16.7 9.1 14.7 129.2
Mexico
1.9 1.7 3.7 0.3
0.5
-2.5
-1.2 4.5
Asia
120.0 64.5 -5.2 9.8
14.4 17.9 23.3 244.7
China 41.7
29.6
-4.1
-0.4
3.1
5.7
9.7
85.4
Hong
Kong
12.8 7.0 2.9 -0.9
-0.8
-0.6 2.8 23.1
Indonesia
0.4 0.0 0.2 0.0
0.1 0.1 0.1 1.0
Japan 39.6
22.0
-1.6
0.8
9.5
2.7
0.3
73.3
Korea 11.3
0.6
-0.2
1.2
-3.2
0.8
3.5
14.0
Malaysia
2.1 0.3 0.5 0.5
0.0 0.3 0.4 4.0
Philippines 0.2
0.1
-0.2
0.1
0.4
0.1
-0.4
0.4
Singapore
6.9 -1.1 -3.1 8.3 3.2 4.4 6.5 25.2
Taiwan
1.2 1.6 5.0 5.3
2.9 3.9 3.8 23.7
Thailand
0.0 0.2 0.0 0.1
0.1 0.0
-0.1 0.3
Australia
5.0 0.3 0.4 -1.7
-3.5
-1.4 2.1 1.2
Source: Developed by CRS from the Treasury Department’s International Capital data system, February, 2014.
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Major Foreign Holdings of U.S. Long-Term Securities
As Table 11 indicates, total foreign holdings, or the cumulative amount, of marketable and non-
marketable long-term U.S. Treasury bills, bonds, and notes amounted to over $5.8 trillion at year-
end 2013. These holdings are comprised of foreign private holdings and foreign official holdings
for each country listed. Of the total accumulated amount, foreign official institutions held $4.0
trillion in 2013, or more than double the $1.8 trillion accumulated by private investors. The data
for foreign official institutions consist of more than the foreign reserve asset holdings of central
banks and of other foreign government institutions involved in the formulation of international
monetary policy. These holdings also include the holdings of foreign government-sponsored
investment funds and other foreign government investment funds. Distinguishing between foreign
private and official holdings, however, can be difficult, because chains of intermediaries can
obscure the country and the type of foreign holder. As a result, foreign official holdings likely are
undercounted in these data.
With $1.3 trillion in accumulated holdings of long-term Treasury securities over the 2007-2013
period, China is the single largest holder of such securities. Over the same period, Japan had
accumulated $1.2 trillion in such holdings. Between 2004 and 2013, China increased its holdings
of Treasury securities by more than five times. With $290 billion accumulated by Caribbean
banking centers, they rank as the third largest holders of such securities, although they often act
as intermediaries for other investors seeking to place their holdings in offshore accounts. They
rank ahead of the oil exporting countries with $238 billion in Treasury securities holdings.16
Table 11. Major Foreign Holdings, or Cumulative Amounts,
of Long-Term U.S. Treasury Securities
(in billions of dollars)
2013 2012 2011 2010
China
$1,268.9 China
$1,220.4 China
$1,151.9 China
$1,160.1
Japan
1,182.5 Japan
1,111.2 Japan
1,058.1 Japan
882.3
Carib Bnkng
290.9
Carib Bnkng
268.3
Oil Exporters
260.8
United Kingdom
270.4
Ctrs
Ctrs
Belgium
256.8
Oil Exporters
262.0
Carib Bnkng
227.2
Oil Exporters
211.9
Ctrs
Brazil
245.4 Brazil
253.3 Brazil
226.9 Brazil
186.1
Oil Exporters
238.3
Taiwan
195.4
Taiwan
177.3
Carib Bnkng Ctrs
168.4
Taiwan
182.2 Switzerland
195.4 Russia
149.5 Taiwan
155.1
Switzerland
175.1 Russia
161.5 Luxembourg
147.6 Russia
151.0
United
Kingdom
163.6 Luxembourg
154.7 Switzerland
142.4 Hong
Kong
134.2
Hong Kong
158.8
Hong Kong
141.9
Belgium
135.2
Switzerland
106.8
Russia
138.6 Belgium
138.8 Hong
Kong
121.7 Luxembourg
86.4
Luxembourg
134.4 United
Kingdom
132.6 United
Kingdom
114.3 Canada
75.3

16 Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar,Saudi Arabia, the
United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
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Foreign Investment in U.S. Securities

2013 2012 2011 2010
Ireland
125.1 Ireland
103.1 Ireland
97.7 Singapore
72.9
Norway
97.2 Singapore
99.3 Singapore
75.1 Germany
60.5
Singapore
86.2 Norway
75.1 Germany
60.7 Thailand
52.0
India
68.5 Canada
66.2 Norway
56.7 Ireland
45.8
Germany
67.2 Germany
63.2 Thailand
51.6 India
40.5
Mexico
65.1 Mexico
61.1 Korea
47.3 Korea
36.2
Canada
55.7 India
59.5 Canada
45.1 Mexico
33.6
Korea
53.9 Turkey
57.6 France
44.7 Belgium
33.2
France
53.6 Thailand
53.6 India
43.5 Turkey
28.9
Turkey
52.2 France
51.4 Philippines
32.7 Egypt
26.0
Thailand
51.7 Korea
47.6 Turkey
32.0 Poland
25.5
Philippines
40.2 Philippines
36.8 Mexico
29.4 Italy
23.7
Netherlands
36.9 Chile
33.0 Sweden
28.9 Netherlands
22.7
Sweden
33.9 Netherlands
32.0 Poland
28.5 Israel
20.6
Australia
33.8 Poland
31.5 Spain
24.0 Colombia
20.2
Colombia
33.0 Colombia
30.2 Colombia
23.5 Philippines
20.1
Poland
30.9 Sweden
27.8 Chile
23.0 Norway
19.6
Italy
30.3 Italy
27.5 Italy
22.8 Sweden
16.8
Chile
26.1 Spain
27.4 Australia
21.8 France
15.0
Israel
23.7 Australia
27.4 Netherlands
21.7 Australia
14.9
Spain
23.0 Israel
24.1 Malaysia
20.6 Chile
13.9
Peru
14.8 Malaysia
19.3 Israel
19.3 Malaysia
11.5
Denmark
14.5 Peru
14.5 Denmark
16.5 Al
Other
193.3
Malaysia
11.8 Denmark
13.8 South
Africa
12.1 Grand
Total
4,435.6
South Africa
11.3
South Africa
13.1
Al Other
214.7

Uruguay
10.7 Al
Other
242.4 Grand
Total
5,006.9
Al Other
208.0
Grand Total
5,573.8


Grand Total
5,794.9






Of which:
Of which:
Of which:
Of which:
For. Official
4,054.4
For. Official
4,032.2
For. Official
3,620.6
For. Official
3,189.3
Treasury Bills
398.3 Treasury
Bills
372.7 Treasury
Bills
357.2 Treasury
Bills
462.3
T-Bonds &
3,656.1
T-Bonds &
3,659.5
T-Bonds &
3,263.4
T-Bonds & Notes
2,727.0
Notes
Notes
Notes
Source: U.S. Department of the Treasury. Data represent estimated foreign holdings of U.S. Treasury
marketable and non-marketable bills, bonds, and notes. Data represent totals as of the end of December of the
year indicated.
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Table 12 shows the relative shares of foreign holdings of total U.S. securities from 1974 to 2000.
These data indicate that between 1974 and 1984, there was little growth in the relative shares of
foreign holdings of various types of U.S. long-term securities. Since 1984, however, there has
been significant growth in the foreign share of all types of long-term securities, particularly in the
foreign share of long-term marketable U.S. Treasury securities, which grew from 13% of the total
amount outstanding to in 1984 to 35% of the total in 2000. In total, foreign investors hold 10% of
the combined value of outstanding U.S. corporate equity, corporate and municipal bonds,
marketable Treasury securities, and other U.S. government securities.
Table 12. Market Value of Foreign Holdings of U.S. Long-Term Securities,
by Type of Security
(in billions of dollars)

Total outstanding
Foreign owned
Percent foreign owned

Corporate equity
1974 $663
$25
3.8%
1978 1,012
48
4.7%
1984 1,899
105
5.5%
1989 4,212
275
6.5%
1994 7,183
398
5.5%
2000 23,038
1,711
7.4%

Corporate and municipal debts
1974 458
N.A.
N.A.
1978 680
7
1.0%
1984 1,149
31
2.7%
1989 2,400
190
7.9%
1994 3,342
276
8.3%
2000 5,404
712
13.2%

Marketable U.S. Treasury securities
1974 163
24
14.7%
1978 326
39
12.0%
1984 873
118
13.5%
1989 1,599
333
20.8%
1994 2,392
464
19.4%
2000 2,508
885
35.3%

U.S. government corporation and federally sponsored agency securities
1974 106
N.A.
N.A.
1978 188
5
2.7%
1984 529
13
2.5%
1989 1,267
48
3.8%
1994 2,199
107
4.9%
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Total outstanding
Foreign owned
Percent foreign owned
2000 3,968
257
6.4%

Combined market
1974 1,390
67
4.8%
1978 2,206
99
4.5%
1984 4,450
268
6.0%
1989 9,478
847
8.9%
1994 15,116
1,244
8.2%
2000 34,918
3,576
10.2%
Source: Griever, William L., Gary A. Lee, and Francis E. Warnock, The U.S. System for Measuring Cross-
Border Investment in Securities: A Primer with a Discussion of Recent Developments. Federal Reserve Bulletin,
October 2001. 639.
Economic Implications
The large foreign accumulation of U.S. securities, particularly of U.S. Treasury securities, has
spurred some observers to consider the potential for a financial crisis. Such a crisis could result
from a coordinated withdrawal from U.S. financial markets staged by foreign investors for
economic or political reasons or a sharp drop in U.S. equity prices as a result of an uncoordinated
correction in market prices.17 Congress likely would find itself embroiled in any such crisis
through its direct role in conducting fiscal policy and in its indirect role in the conduct of
monetary policy through its supervisory responsibility over the Federal Reserve. A coordinated
withdrawal from U.S. securities markets by foreign investors seems highly unlikely, particularly
since the vast majority of the investors are private entities that presumably would find it difficult
to coordinate a withdrawal.
It is uncertain what events could provoke a coordinated withdrawal from U.S. securities markets.
Some surmise that international concern over the ability of the economy to service its large
foreign debt could spur foreign investors to rein in their purchases of U.S. financial assets, or that
a loss of confidence in the ability of national U.S. policymakers to conduct economic policies that
are perceived abroad as prudent and stabilizing could cause foreign investors to reassess their
estimates of the risks involved in holding dollar-denominated assets. The sovereign debt crisis in
Europe also has called into question the presumption by most financial investors that government
securities are risk-less. In other cases, the international linkages that connect national capital
markets could be the conduit through which events in one market are quickly spread to other
markets and ignite an abrupt, seemingly uncoordinated decline in equity prices. Such a market
correction, or a market panic, is expected to be short-lived, however, as investors would likely
move to take advantage of a drop in equity prices to acquire equities that would be deemed to be
temporarily undervalued. For instance, concerns in U.S. capital markets in early June 2006 over
prospects that a rise in consumer prices and in the core inflation rate would push the Federal
Reserve to raise key U.S. interest rates sparked a drop in prices in U.S. capital and equity markets

17 For a longer presentation of this topic, see CRS Report RL34319, Foreign Ownership of U.S. Financial Assets:
Implications of a Withdrawal, by James K. Jackson.
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where inflation concerns quickly spread to markets in Europe and Asia, where equity prices fell
as well.18
Foreign capital inflows are playing an important role in the economy. Such inflows bridge the gap
between U.S. supplies and demands for credit, thereby allowing consumers and businesses to
finance purchases at interest rates that are lower than they would be without the capital inflows.
Similarly, capital inflows allow federal, state, and local governments to finance their budget
deficits at rates that are lower than they would be otherwise. The global financial crisis and the
accompanying economic recession reduced U.S. demands for capital inflows. A decrease in U.S.
liabilities to foreigners by U.S. banks likely reflected tight credit conditions and prove to be
especially difficult for developing countries that have a more limited access to financial markets.
Capital inflows, however, are not without some cost to the economy. Foreign ownership of U.S.
securities means that foreigners receive any dividend or interest payments that arise from those
securities and that the economy experiences a transfer of wealth associated with flows of goods
and capital across borders. To the extent that foreign investors repatriate their earnings, financial
resources within the economy are reduced. Increased foreign ownership of corporate stocks and
bonds also blurs the distinction between domestic and foreign-owned firms and may well
influence the way firms view trade, economic, and other types of public policies, thereby
affecting their relationships with Congress. In addition, as long as credit demands in the economy
outstrip domestic supplies of credit, foreign sources of capital will be necessary to reduce
pressure on U.S. interest rates. To the extent that foreign investors become reluctant for any
reason to continue to supply the economy with capital, Congress could find it more difficult to
finance a budget deficit by drawing on domestic capital markets without the economy feeling the
impact of such borrowing.
The prospect of continued high levels of U.S. borrowing from the rest of the world concerns
various international organizations, such as the International Monetary Fund (IMF) and the
Organization for Economic Cooperation and Development (OECD). In its April 2006 edition of
World Economic Outlook,19 the IMF highlighted the role U.S. economic policies played in the
short run in stemming a potentially serious economic slowdown in both the United States and the
global economy. Over the long run, however, the IMF argues that the saving-investment
imbalance in the U.S. economy threatens to affect global interest rates, productivity and income,
and the growing deficits in the nation’s already large current account (exports, imports, and
official capital flows) as a result of sustained high levels of capital inflows. These effects could be
especially serious for many of the developing nations that rely on borrowing in global financial
markets. Rising interest rates in the United States could raise interest rates globally, which would
raise borrowing costs to developing countries. The IMF argued that, “over time changes in U.S.
interest rates feed through about one-to-one to foreign interest rates, implying that, in the long
run, the rest of the world is affected in a similar manner to the United States.”20
In a May 2004 publication,21 the OECD also questioned the feasibility of sustaining large trade
deficits given that the deficits are accommodated by foreign investors who must remain willing to

18 Masters, Brooke A., Pondering the Bear Necessities, The Washington Post, June 7, 2006, p. D1; Samuelson, Robert
J., Global Capital On the Run, The Washington Post, June 14, 2006, p. A23.
19 World Economic Outlook, International Monetary Fund. Washington, DC, April 2006.
20 World Economic Outlook, International Monetary Fund. Washington, DC, April 2004. pp. 69-70.
21 The Challenges of Narrowing the U.S. Current Account Deficit. OECD Economic Outlook No. 75, May 2004.
(continued...)
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hold dollar-denominated assets. Foreign investors essentially engage in cross-border risk
management and will assess their estimates of risk based on a broad range of factors, including
the ability of the economy to support a potentially increasing level of debt. According to the
OECD, “While the United States remains an attractive investment destination in many respects, it
is uncertain for how long foreigners will continue to accommodate debt and equity claims against
U.S. residents at the recent pace.”22
The highly evolved state of financial and economic linkages between the United States and other
foreign economies significantly reduces the prospects of a financial collapse in the United States
should foreigners attempt a coordinated withdrawal from U.S. securities markets. A withdrawal
by any single large foreign investor, or a group of investors, from the U.S. financial markets at a
time when those funds are necessary for closing the gap between domestic demand and supply of
funds would likely have significant short-run effects. Any such coordinated attempt to withdraw
substantial amounts of funds abruptly from the U.S. markets would ordinarily be noticed quickly
by domestic and international financial markets. As investors became aware of any large
withdrawals, they likely would follow suit, driving the prices of the asset down sharply and
causing U.S. interest rates to rise abruptly. Any investor selling assets at this point likely would
experience a significant loss in the value of those assets. In fact, the United States continues to be
viewed as a “safe haven” for international investors, as was evident during the 2008-2009
financial crisis.
A similar downward spiral would occur over the short-run in the value of the dollar if foreign
investors attempted to convert their dollar holdings into foreign currency. The financial and
currency markets likely would adjust quickly to the demands of foreign sellers of dollars by
driving up the price of foreign currencies. This likely would result in a decline in the value of the
dollar and a further erosion in the value of the assets of foreigners attempting to withdraw from
the U.S. markets.
Over the long run, the economic and financial effects of a foreign withdrawal from U.S. financial
markets would be limited because those factors which allowed foreigners to withdraw would
attract other foreign investors to the U.S. markets. As U.S. interest rates rose in response to the
selling of securities, other investors likely would be attracted to the higher returns of the assets,
which would curb the decline in the prices in the securities. Also, the rise in U.S. interest rates
would attract foreign capital, which would limit the rise in interest rates. A decline in the value of
the dollar against other currencies would also improve the international price competitiveness of
U.S. goods. As a result, U.S. exports would increase, likely narrowing the gap between the
earnings on U.S. exports and the amount Americans spend on imports, thereby reducing the
amount of foreign capital the U.S. economy would need. Furthermore, those foreign investors
who are successful in withdrawing their funds from the U.S. markets would have to find suitable
alternatives. Even if they did not reinvest their finds in the United States, the infusion of capital
back into foreign capital markets likely would have spillover effects on the United States and on
U.S. securities.
It is evident that the Federal Reserve will not idly sit on the sidelines watching while the U.S.
economy suffers a financial collapse. During the financial crisis of 2008-2009, the Federal

(...continued)
Available at http://www.oecd.org/dataoecd/4/58/31920358.pdf.
22 Ibid., p. 31.
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Reserve acted aggressively, including negotiating emergency swap arrangements with other
central banks to assure an adequate supply of dollars, and serving as the lender of last resort by
providing credit and liquidity to financial markets. Also, in the immediate aftermath of the
September 11, 2001, terrorist attacks, the U.S. financial and foreign exchange market activities
were slightly out of the norm, but actions by the Federal Reserve and by other central banks
helped head off a financial panic and a loss of confidence by ensuring that the financial system
was supplied with liquidity through coordinated actions. Such coordination also was key to the
global response to the current financial crisis. Central bank coordination in times of crises is not
uncommon, but the speed with which the coordination was reached and the aggressiveness of the
banks to stem any loss of confidence in the financial system demonstrate the recognition that
national economies have become highly interconnected and that a shock to one can create
spillover effects onto other economies and markets.23

Author Contact Information

James K. Jackson

Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751



23 Jackson, International Capital Flows Following the September 11 Attacks.
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