Foreign Investment in U.S. Securities
James K. Jackson
Specialist in International Trade and Finance
August 14, 2015
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 are 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 ........................................................................................... 11
Purchases and Sales of U.S. Securities by Foreign Investors ........................................................ 15
Corporate Stocks ..................................................................................................................... 17
Corporate Bonds...................................................................................................................... 18
Major Foreign Holdings of U.S. Long-Term Securities .......................................................... 19
Economic Implications .................................................................................................................. 23

Figures
Figure 1. Foreign Official and Private Capital Inflows to the United States, 1996-2014 ............... 3
Figure 2. Total Net Saving and Investment for All Countries, 2006-2014 ...................................... 6
Figure 3. Foreign Ownership Share of Publicly Held Treasury Securities, 2001-2015 ................. 11
Figure 4. Net Foreign Purchases of U.S. Domestic Securities, 2000-2014 ................................... 12
Figure 5. Foreign Official and Private Purchases of U.S. Treasury Securities, 1997-2014........... 15

Tables
Table 1. Capital Inflows of the United States, 1996-2014 ............................................................... 2
Table 2. Flow of Funds of the U.S. Economy, 1996-2014 .............................................................. 4
Table 3. Saving and Investment in Selected Countries and Areas; 2001-2008, 2009-2013,
and 2014 ....................................................................................................................................... 6
Table 4. Foreign Exchange Market Turnover .................................................................................. 9
Table 5. Transactions in Long-Term U.S. Securities, 2014 ........................................................... 13
Table 6. Foreign Transactions in U.S. Domestic Securities, 2013-2015 ....................................... 14
Table 7. Net Purchases of U.S. Domestic Securities by Foreigners .............................................. 16
Table 8. Net Foreign Purchases of Publicly Traded U.S. Treasury Securities ............................... 17
Table 9. Net Foreign Purchases of U.S. Corporate Stocks ............................................................ 18
Table 10. Net Foreign Purchases of U.S. Corporate Bonds ........................................................... 19
Table 11. Major Foreign Holdings, or Cumulative Amounts, of Long-Term U.S. Treasury
Securities .................................................................................................................................... 20
Table 12. Market Value of Foreign Holdings of U.S. Long-Term Securities, by Type of
Security ...................................................................................................................................... 22

Contacts
Author Contact Information .......................................................................................................... 26

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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
$454 billion, or down by three-fourths from 2007. In 2009, such inflows fell to $318, 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 $31 billion, down from the $1.0 trillion they accounted for in 2007
as foreign investors pared back their holdings of corporate securities. Total capital inflows
rebounded in 2013 and 2014, to reach around $1 trillion annually.
In 2008 and 2009, official inflows outpaced the net inflows by private investors, reflecting both
the collapse in private investment and the actions by governments to stabilize capital markets.
Other private capital inflows are associated with U.S. liabilities to foreigners reported by U.S.
banks and such non-bank financial firms as investment and securities firms. These accounts
registered net outflows, or negative amounts, in 2008 for banks, mostly as a result of a large
reduction in foreign banks’ deposits at banks in the United States, and negative amounts in 2007-
2009 for non-bank financial firms. Since 2009, private capital inflows have outpaced official
inflows as a result of a combination of foreign direct investment in U.S. business and investment
in U.S. Treasury securities and corporate stocks and bonds. The value of foreign direct investment
in 2014 dropped below that recorded for 2013, likely reflecting a large stock buy-back between
Verizon and the French firm Vodafone.
In general, capital 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
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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 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, 1996-2014
(in billions of dollars)
Private assets
Official
Treasury
Corporate
U.S.

Total
assets
Total
Direct
Other
investment
securities
securities
currency

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
2,116.3 487.9
933.1
294.3
-58.2
720.7
2.2
695.3
2007
2,183.5 481.0
1,015.6 340.1
66.8
640.0
-10.7
686.9
2008
454.1
554.6
301.8
332.7
162.9
-39.8
29.2
-402.4
2009
318.4
480.2
30.9
153.8
-15.5
-17.5
12.6
-192.8
2010
1,386.3 397.2
682.5
259.3
298.3
103.9
28.3
306.6
2011
977.1
243.3
325.7
257.4
185.5
-57.8
55.0
408.0
2012
601.0
397.0
567.7
217.8
156.0
154.6
57.1
-362.8
2013
1,042.0 309.5
468.6
287.2
178.2
120.3
NA
252.8
2014
977.4
100.4
724.0
131.8
187.1
384.8
NA
140.6
Source: Bureau of Economic Analysis, Survey of Current Business, various issues.


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Figure 1. Foreign Official and Private Capital Inflows to the United States, 1996-2014

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 2014, 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 2000, when the federal government and state and local governments
experienced financial surpluses. Capital inflows from the rest of the world rose and fell during

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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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.
Table 2. Flow of Funds of the U.S. Economy, 1996-2014
(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
-296.1
-74.9
-400.2
22.6
-422.8
698.5
2006
-366.4
-202.9
-311.8
-1.4
-310.4
529.8
2007
243.2
-265.2
-450.3
-59.7
-390.6
151.5
2008
1,081.5
-984.8
-1,121.0
-322.9
-798.1
765.2
2009
598.8
593.3
-1,734.2
-436.0
-1,298.2
28.0
2010
898.9
174.7
-1,722.3
-307.4
-1,414.9
268.2
201I
1,346.6
-415.9
-1,698.0
-345.6
-1,352.4
416.7
2012
1,094.5
-506.0
-1,387.9
-270.7
-1,117.2
446.6
2013
833.7
13.2
-935.1
-272.8
-662.3
371.8
2014
844.3
-309.1
-834.7
-235.1
-599.6
166.2
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.
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
can vary in size in nominal terms as households experience periods of saving and dissaving and
government sector surpluses turned to deficits.
On a balance of payments basis, capital inflows in 2009 were $28 billion, a sharp drop from the
$765 billion recorded in 2008. This drop in capital inflows reflected a sharp reversal in the
behavior of households and firms from dissaving to saving, and an increase in the deficits
experienced by federal and state and local governments as the effects of the economic slowdown
became more pronounced. Households turned from a dissaving of $366 billion in 2006 to a net
saving of $1.1 trillion in 2008 and $1.3 trillion in 2011, reflecting tight credit conditions, a sharp
drop in household wealth, and concerns among households over the state of the economy. The
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Federal Reserve reported that in 2008, households experienced a drop in their net worth from $65
trillion to $55 trillion, or about 15%. By the end of the first quarter of 2015, household net worth
had grown by about $30 trillion from the end of 2009 to reach $85 trillion.2
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 during the global financial crisis and 2010 and 2011 as a result of the European
debt crisis.
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, as indicated in Figure 2. 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 an increase in its overall rate of saving
and in the rate of domestic investment expressed as a share of national gross domestic product
(GDP), compared with the period prior to the financial crisis, as indicated in Table 3. The
increase in saving relative to investment has lessened the requirement for capital inflows,
especially in 2013 and 2014.

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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Figure 2. Total Net Saving and Investment for All Countries, 2006-2014
Net Saving and Investment as a percent of GDP

Source: International Monetary Fund.
Table 3. Saving and Investment in Selected Countries and Areas; 2001-2008,
2009-2013, and 2014
(percentage of Gross Domestic Product)
Average,
Average,
Area/Country
2001-2008
2009-2013
2014
Change
World



Saving
23.7%
24.7%
25.5%
0.8%

Investment
23.7%
24.3%
24.9%
0.6%
United States



Saving
17.8
16.2
17.9
1.7

Investment
22.2
18.6
19.8
1.2
Other Advanced Economies



Saving
21.7
20.3
21.1
0.8

Investment
22.6
20.4
20.7
0.3

Eurozone


Saving
23.0
21.8
22.5
0.7

Investment
22.6
20.4
19.2
-1.2
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Average,
Average,
Area/Country
2001-2008
2009-2013
2014
Change

Japan



Saving
26.3
22.5
22.4
-0.1

Investment
22.8
20.3
21.8
1.5
Emerging Developing Economies



Saving
29.7
32.7
32.3
-0.4

Investment
27.1
31.5
31.6
0.1

Developing Asia


Saving
39.0
44.0
43.0
-1.0

Investment
35.5
42.2
41.6
-0.6

Middle East


Saving
35.1
35.3
31.7
-3.6

Investment
25.8
27.4
25.4
-2.0
Source: World Economic Outlook, International Monetary Fund, April 2015, Table A-14.
Note: The change indicated in the final column represents the change between the value of the respective line in
2014 and the average amount in the preceding five-year period.
As Table 3 indicates, world saving and investment in 2014, compared with the 2009-2013 period,
increased by 0.8% and 0.6% of GDP, respectively. The shift toward more saving relative to
investment in 2014 compared with the average of 2009-2013 and the 2009-2013 period compared
with the previous period reflects the far-reaching impact of the economic recession on the
performance of economies world-wide. In some areas, economic activity has not fully recovered
from the recession and saving by households has increased as a share of GDP. Similarly, in the
United States both saving and investment increased in 2014 relative to the average of the previous
five-year period. Although saving as a share of GDP increased more than investment, investment
continued to account for a larger share of GDP than saving. Among other advanced economies
saving and investment increased in 2014 compared with the previous five-year period. In the
Eurozone area, continued concerns over the sovereign debt crisis and limited access to financing
restrained business investment in 2014 below the average of the previous five-year period and
relative to the period prior to the financial crisis. In Japan, saving fell as a share of GDP, perhaps
reflecting the sharp rise in sales taxes in Japan, although business investment increased in 2014
relative to the average of the previous period. In the emerging 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 2014 fell relative to 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 2014 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
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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 2014, the United States received $823 billion in income receipts on its investments
abroad and paid out $585 billion in income payments on foreign-owned assets in the United
States for a net surplus of $238 billion in income receipts, up slightly from the net surplus in
income receipts experienced in 2013. 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
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

3CRS Report RL32964, The United States as a Net Debtor Nation: Overview of the International Investment Position,
by James K. Jackson, 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
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.
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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.
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


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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1998
2001
2004
2007
2010
2013
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 averaged $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.
Treasury securities. Foreigners now own about 58% of the total amount of outstanding U.S.
Treasury securities that are publicly held and traded, as indicated in Figure 3.12

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.
12 Treasury Bulletin, June 2015. Table OFS-, p. 43.
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Figure 3. Foreign Ownership Share of Publicly Held Treasury Securities, 2001-2015

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.14 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

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/.
14 According to the Bureau of Economic Analysis (BEA), data in the U.S. Department of the Treasury’s International
Capital (TIC) report do not correspond directly to data on financial transactions that are reported in the BEA’s balance
of payments accounts. BEA adjusts the TIC data on the differences in the outstanding amount, or holdings, of securities
(rather than data on the purchases and sales of securities that are used in this report) between the beginning and end of
the reporting period, whether quarterly or annually, to account for changes in the value in the outstanding amount of
securities that reflect: 1) changes in prices; 2) changes in exchange rates; and 3) changes caused by other changes in the
volume and value of securities. BEA also adjusts the TIC data to remove changes that are reflected in other data
sources for direct investment and official reserve assets. BEA also reclassifies short-term securities and negotiable
certificates of deposit of any maturity that are classified as other investment to portfolio investment. In addition, certain
U.S. financial intermediaries that are not banks, securities brokers, bank holding companies, or financial holding
companies report their holdings of debt with affiliates on BEA surveys of direct investment rather than to the TIC
system; these data are reported as financial intermediaries. BEA also uses partner country counterparty claims and
liabilities provided by foreign banking authorities to close gaps in coverage of U.S. nonbanking concerns. Finally, BEA
collects and adds holdings in other investment claims and liabilities of the U.S. central bank sector (Federal Reserve
System) and the U.S. general government. How BEA Aligns and Augments Source Data From the U.S. Treasury
Department for Inclusion in the International Transactions Accounts, Survey of Current Business, September 2014.
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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
inflate the holdings of these custodians, rather than be attributed to the actual foreign owner. The
data in the following tables reflect annualized and quarterly monthly transactions in long-term
securities.15
As the data in Table 5 show, foreign investors buy and sell large amounts of U.S. financial assets,
although the annual accumulation, or net amount, though large in nominal dollar amounts, is
generally small in relative terms when compared with the large amounts of assets that are traded.
The net accumulation of these securities can vary sharply over time, as indicated in Figure 4. In
2014, foreigners purchased over $37 trillion dollars in U.S. securities, including transactions in
foreign stocks and bonds, and sold $36.7 trillion dollars in assets, for a net increase in holdings of
$275 billion, primarily as a result of net purchases of Treasury securities, other government
agency bonds, corporate bonds, and foreign bonds.
Figure 4. Net Foreign Purchases of U.S. Domestic Securities, 2000-2014

Source: Treasury International Capital database.
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.

15 Bertaut, Carol C., William L. Griever, and Ralph W. Tryon, Understanding U.S. Cross-Border Securities Data,
Federal Reserve Bulletin, 2006. p. A59-A75.
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From 1998 to 2007, however, the net accumulation of equities and corporate bonds by foreign
investors surpassed the net accumulation of Treasury securities. After 2007, as the rate of growth
of the U.S. economy began to slow and in the period following the financial crisis, the net
accumulation of Treasury securities by foreign investors has surpassed the net accumulation of
equities and corporate bonds. During the fourth quarter of 2014 and the first quarter of 2015, this
trend reversed as the net accumulation of corporate securities by foreign investors surpassed their
net accumulation of Treasury securities. The low risk associated with Treasury securities
generally makes them highly desirable, especially during periods of market uncertainty. 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.16
Table 5. Transactions in Long-Term U.S. Securities, 2014
(in billions of dollars)
Marketable
U.S. Govt.
Corporate
Corporate
Foreign
Foreign
Total
Treasury Securities Bonds
Bonds
Stocks
Bonds
Stocks
Gross Purchases by Foreigners
$37,012.8 $16,744.9
$1,114.7
$1,084.3
$8,924.0
$4,752.8
$4,392.1
Gross Sales by Foreigners
36,737.5
16,579.3
1,040.1
1,059.0
8,940.1
4,621.1
4,497.9
Net Purchases by Foreigners
275.3
165.5
74.6
25.3
-16.1
131.7
-105.7
Source: Treasury Department International Capital data system, June, 2015.
Table 6 shows gross purchases, gross sales, and net sales of publicly traded long-term U.S.
Treasury securities, corporate stocks, and corporate bonds in 2013 and 2014 and the first quarter
of 2015. At nearly $17.6 trillion, Treasury securities were the most heavily traded of the three
kinds of securities in 2014. From 1997 to 2001, foreign official and private net acquisitions of
Treasury securities plummeted as the Federal government used its budget surpluses to retire large
amounts of securities, as indicated in Figure 5. 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. In the first quarter of 2015, foreign investors sold $51 billion
more in Treasury securities than they acquired and they reduced their holdings of U.S. corporate
stocks, while increasing their holdings of corporate bonds. Similarly, foreign investors reduced
their holdings of foreign stocks and increased their holdings of foreign bonds. The decline in the
value of the euro relative to the dollar and low interest rates in Europe have enticed U.S. firms to
issue a large number of euro-denominated bonds in European capital markets in the first quarter
of 2015, offering an alternative to investing in U.S. securities.17

16 For additional information, seeCRS Report RS21102, International Capital Flows Following the September 11
Attacks, by James K. Jackson, International Capital Flows Following the September 11 Attacks, by James K. Jackson.
17 Moore, Phil, Does QE Stand for Quick Euros? Euromoney, June 2015, p. 100.
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Table 6. Foreign Transactions in U.S. Domestic Securities, 2013-2015
(in billions of dollars)

2013
2014
2014-I
2014-II
2014-III
2014-IV
2015-I
Treasury Securities
Purchases $17,568.2
$16,744.8
$4,467.9
$4,208.6
$3,924.6
$4,143.8
$4,308.5
Sales
17,525.3
16,579.3
4,352.1
4,211.9
3,851.6
4,163.7
4,359.8
Net
42.9
165.5
115.7
-3.3
73.0
-19.9
-51.2
Corporate Stocks
Purchases 7,677.0
8.924.0
2,164.7
2,236,6
1,937.4
2,585.3
2,553.9
Sales
7,717.3
8,940.1
2,186.6
2,213.0
1,938.6
2,601.8
2,567.4
Net
-40.2
-16.1
-21.9
23.6
-1.2
-16.6
-13.6
Corporate Bonds
Purchases 934.9
1,084.3
247.8
275.8
269.1
291.5
317.1
Sales
919.3
1,059.0
248.3
295.7
262.8
252.1
283.2
Net
15.6
25.3
-0.5
-19.9
6.3
39.4
33.8
Source: Treasury Department International Capital data system, June, 2015.
As Figure 5 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 2014 (except 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 2013. Official purchases were particularly strong in 2008 and 2009,
when they reached $549 and $570 billion, respectively, far outpacing foreign private net
purchases. In 2014, foreign official net purchases dropped to $88 billion, about half the amount of
private net 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.


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Figure 5. Foreign Official and Private Purchases of U.S. Treasury Securities,
1997-2014

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, reduced net foreign acquisitions in
corporate stocks and bonds, likely propelled by reduced corporate profits and uncertainty
concerning the economic recovery, which 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 between 2000 and 2014 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. domestic securities markets—U.S. Treasury
securities, U.S. corporate stocks and bonds—than are others. As Table 7 indicates, in 2013 and
2014, China surpassed the United Kingdom in annual net accumulation of U.S. domestic
securities to become the largest foreign investor in U.S. securities.
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Table 7. Net Purchases of U.S. Domestic Securities by Foreigners
(in billions of dollars)
2012
2013
2014
2014-I
2014-II
2014-III
2014-IV
2015-I
Total
$634.1
$79.4
$249.3
$82.9
$8.2
$116.8
$41.3
$4.5
Total Europe
199.6
-21.8
-54.5
1.2
-23.6
-8.3
-23.9
-35.7
France
93.8
70.3
81.1
35.4
1.9
26.5
17.4
13.8
Germany
7.7
2.0
2.1
0.0
4.8
-2.8
0.1
-0.6
Italy
-2.2
-4.7
-8.1
-1.9
-1.3
-2.4
-2.6
-2.3
Netherlands
-5.1
-2.4
-6.9
-3.4
-5.1
-0.2
1.7
-2.4
Sweden
-2.8
1.2
1.6
1.3
2.4
-2.6
0.4
-0.5
Switzerland
65.2
-23.2
-8.5
-5.1
-1.3
0.3
-2.4
20.2
United Kingdom 126.4
124.8
90.8
-6.9
12.9
-0.2
6.6
2.8
Canada
75.7
-11.7
12.4
-6.9
12.9
-0.2
6.6
2.8
Latin America 55.6
-129.2
-2.2
-45.4
-7.9
16.1
34.9
27.0
Mexico
22.9
-21.2
15.8
-6.5
13.0
12.9
-3.5
0.2
Asia
240.6
154.7
226.3
73.1
88.0
49.0
16.1
7.7
China
84.6
166.9
210.7
63.7
76.9
33.2
37.0
22.1
Hong Kong
-3.0
-23.1
15.8
9.9
8.5
11.0
-13.7
-5.0
Indonesia
3.4
-2.8
1.8
-0.3
1.8
0.4
-0.7
0.0
Japan
103.0
-3.3
-9.9
6.2
-5.8
-6.4
-3.9
-5.1
Korea
14.9
4.0
3.0
-2.6
2.1
1.2
2.4
-1.2
Malaysia
3.7
-1.3
-2.8
-0.9
-0.8
0.0
-1.1
-0.3
Philippines
2.8
3.3
3.3
0.6
-0.1
0.3
2.5
-1.3
Singapore
5.4
-10.5
-10.7
-3.5
-2.1
3.6
-8.7
5.2
Taiwan
-8.1
10.1
29.1
34.1
2.5
13.9
19.8
101.5
Thailand
1.5
-2.4
-3.0
-1.3
-0.1
-1.6
0.1
-1.2
Australia
7.6
5.1
0.2
-0.2
2.8
1.6
-3.9
3.6
Source: Developed by CRS from the Treasury Department’s International Capital data system. June, 2015.
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. Treasury Securities
As previously indicated, foreign investors are active participates in the U.S. Treasury securities
market, as indicated in Table 8. Total net foreign purchases of Treasury securities varied sharply
over the 2012-2014 period, dropping from $416 billion in 2012 to $40 billion in 2013, before
rising to $165 billion in 2014. In addition, during the fourth quarter of 2014 and the first quarter
of 2015, foreign investors sold a net amount of $20 billion and $51 billion, respectively, in
treasury securities. European investors as a whole turned from net purchases of Treasury
securities to net sellers in 2014 and also were net sellers in the last quarter of 2014 and the first
quarter of 2015. Chinese investors, however, had large net purchases of Treasury securities
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throughout the 2012-2014 period and every quarter in 2014 and 2015. Until 2014, the United
Kingdom also had large net purchases of Treasury securities on an annual basis, but it was
replaced as the largest net purchaser of Treasury securities on an annual basis by Chinese
investors in 2013.
Table 8. Net Foreign Purchases of Publicly Traded U.S. Treasury Securities
(in billions of dollars)
2012
2013
2014
2014-I
2014-II 2014-III
2014-IV 2015-I
Total
$416.4
$40.9
$165.5
$115.7
-$3.3
$73.0
-$19.9
-$51.2
Total Europe
148.6
10.1
-6.9
3.1
2.8
8.1
-20.9
-19.7
France
84.2
81.6
88.7
30.0
16.5
34.6
7.6
19.4
Germany
7.1
-0.9
3.5
-2.0
4.2
-3.9
5.2
-0.2
Italy
0.7
-0.6
-5.6
-1.5
-0.7
-1.4
-2.0
-0.8
Netherlands
-1.7
-2.1
-6.6
-1.8
-3.9
-0.6
-0.3
-0.1
Sweden
-4.4
-1.8
-0.4
0.0
1.2
-1.9
0.4
-0.3
Switzerland
52.9
-13.3
4.4
-2.0
1.8
5.3
-0.6
16.9
United Kingdom
98.4
63.5
-3.3
67.1
-95.9
29.9
-4.5
-41.8
Canada
56.6
-2.4
4.2
-2.8
11.9
-5.2
0.2
7.5
Latin America
-5.3
-116.3
-12.3
-19.7
-24.7
5.9
26.3
7.7
Mexico
26.2
-10.9
21.7
-4.3
12.5
13.9
-0.3
0.7
Asia
167.0
109.4
212.5
79.4
91.1
33.0
9.0
-6.1
China
73.2
81.1
185.7
55.8
75.0
24.7
30.2
18.2
Hong Kong
-0.1
-18.0
23.1
11.7
9.8
3.4
-1.9
-6.6
Indonesia
0.5
-2.5
2.1
0.3
1.9
0.5
-0.6
0.4
Japan
86.3
62.6
10.7
14.1
0.6
2.4
-6.4
-7.7
Korea
1.3
-2.9
-1.5
-2.5
0.4
0.0
0.5
-4.8
Malaysia
-0.7
-4.2
-1.2
-0.8
0.1
0.1
-0.6
0.1
Philippines
2.3
3.6
3.1
0.6
-0.1
0.2
2.4
-1.4
Singapore
0.7
-12.6
1.0
2.1
1.8
3.1
-6.0
6.2
Taiwan
0.0
-4.1
-11.5
-3.2
-1.8
-4.3
-2.1
-10.6
Thailand
1.1
-1.7
-3.3
-1.1
-0.3
-1.9
-0.1
-1.4
Australia
6.6
3.6
-2.1
-2.1
1.1
-0.7
-0.4
3.0
Source: Developed by CRS from the Treasury Department’s International Capital data system, June, 2015.
Corporate Stocks
Net foreign acquisitions of U.S. corporate stocks were negative in both 2013 and 2014, after
recording a positive net balance in 2012, as indicated in Table 9. European investors continued to
post positive net accumulations of U.S. corporate stocks through 2012-2014, before experiencing
net sales of such stocks in the first quarter of 2015. Chinese investors were generally more
bearish on a quarterly basis, slightly reducing their overall holdings of such stocks. Foreign
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investments in U.S. stocks 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.
Table 9. Net Foreign Purchases of U.S. Corporate Stocks
(in billions of dollars)
2012
2013
2014
2014-I
2014-II
2014-III
2014-IV
2015-I
Total
$108.8
$-43.2
$-16.1
$-21.9
$23.6
$-1.2
$-16.8
$-13.6
Total Europe
72.6
8.1
24.2
13.3
-1.5
7.0
5.3
-12.1
France
15.7
0.1
17.6
8.3
-4.4
7.0
6.6
-6.7
Germany
3.3
1.0
-2.0
1.5
0.1
0.0
-3.5
-1.1
Italy
-2.3
-0.9
-0.9
0.3
-0.1
-0.3
-0.8
-1.3
Netherlands
-3.7
0.6
3.8
-0.2
1.0
1.1
1.9
-1.5
Sweden
2.5
3.3
2.3
1.5
1.4
-0.3
-0.3
0.6
Switzerland
11.6
-0.4
-6.2
-0.8
-0.6
-2.8
-2.0
2.2
United Kingdom
34.2
-0.3
-19.7
-6.2
6.0
-8.5
-11.0
-4.0
Canada
14.7
-3.2
10.2
-2.1
6.6
-0.2
5.9
-7.6
Latin America
14.3
-19.0
-11.7
-23.2
12.7
0.0
-1.2
7.4
Mexico
3.2
0.7
1.8
0.2
1.3
0.3
0.0
-0.2
Asia
-2.3
-29.8
-27.7
-4.7
-6.9
0.1
-16.2
-1.4
China
-1.5
2.8
-1.7
0.8
-2.1
0.3
-0.7
-0.3
Hong Kong
0.1
-4.0
-6.6
-0.7
-1.4
6.8
-11.3
0.9
Indonesia
-0.1
0.3
0.0
0.0
0.0
0.0
0.0
0.0
Japan
-8.1
-26.4
-9.2
-0.8
-2.8
-5.8
0.2
1.9
Korea
0.9
2.2
1.8
0.7
0.9
0.4
-0.2
1.1
Malaysia
1.9
1.3
-0.2
0.1
-0.3
0.1
-0.2
-0.3
Philippines
0.0
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
Singapore
-0.9
-3.8
-11.0
-5.3
-3.0
-0.6
-2.1
-0.2
Taiwan
1.0
-1.2
-0.6
0.4
0.2
-0.5
-0.7
-0.4
Thailand
-0.1
-0.3
-0.2
-0.2
0.0
-0.1
0.0
0.1
Australia
1.0
-0.6
0.9
1.8
2.3
-0.4
-2.9
0.9
Source: Developed by CRS from the Treasury Department’s International Capital data system. June, 2015.
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
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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)
2012
2013
2014
2014-I
2014-II
2014-III
2014-IV
2015-I
Total
$-24.1
$10.3
$25.3
$-0.5
$-19.9
$6.3
$39.4
$33.8
Total Europe
-46.0
-44.2
-69.0
-14.1
-22.7
-25.1
-7.2
-5.2
France
-5.6
-9.3
-32.1
-4.6
-11.7
-16.3
0.5
0.0
Germany
-3.2
0.3
-2.8
0.1
-0.1
-0.6
-2.2
-0.3
Italy
-0.6
-2.9
-0.7
-0.4
-0.1
-0.5
0.3
-0.1
Netherlands
0.6
-0.6
-4.9
-1.2
-1.9
-1.1
-0.6
-0.9
Sweden
-0.7
-0.2
-0.3
-0.1
-0.2
-0.4
0.4
-0.7
Switzerland
0.1
-7.3
-4.5
-1.3
-2.1
-1.9
0.8
0.9
United Kingdom
-10.8
19.1
77.2
15.5
6.6
19.0
36.0
30.9
Canada
-0.8
-3.2
-5.6
-2.1
-5.9
3.8
-1.3
-1.3
Latin America
9.1
15.6
22.4
2.3
5.6
6.0
8.5
9.4
Mexico
-2.5
-1.2
-0.4
0.2
-0.3
0.2
-0.5
0.1
Asia
17.9
23.3
-10.2
-4.0
-2.7
-3.1
-0.3
-3.8
China
5.7
9.7
0.5
-0.4
0.3
0.7
-0.1
0.4
Hong Kong
-0.6
2.8
2.3
0.8
0.7
0.2
0.5
0.8
Indonesia
0.1
0.1
-0.3
0.0
0.0
0.0
-0.3
-0.1
Japan
2.7
0.3
-11.5
-3.9
-2.7
-3.9
-0.9
-3.3
Korea
0.8
3.5
2.8
1.6
0.6
-0.2
0.8
0.3
Malaysia
0.3
0.4
-0.3
0.0
-0.2
-0.2
0.1
0.1
Philippines
0.1
-0.4
0.0
0.0
0.0
0.0
0.0
0.1
Singapore
4.4
6.5
0.1
-0.1
-0.6
1.2
-0.4
-0.5
Taiwan
0.0
-0.1
0.4
0.1
0.0
0.3
0.0
0.0
Thailand
0.0
-0.1
0.4
0.1
0.0
0.3
0.0
0.0
Australia
-1.4
2.1
2.2
0.3
-0.2
2.7
-0.6
-0.3
Source: Developed by CRS from the Treasury Department’s International Capital data system, June, 2015.
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 $6.1 trillion at the
end of the first quarter of 2015. 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 $4.1 trillion in 2015, or more than double the $2.0 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
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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, China is the single
largest holder of such securities. At the end of the first quarter of 2015, Japan had accumulated
$1.2 trillion in such holdings. With $296 billion accumulated in long-term Treasury securities,
Caribbean banking centers 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 $293 billion in Treasury securities holdings.18
Table 11. Major Foreign Holdings, or Cumulative Amounts, of Long-Term U.S.
Treasury Securities
(in billions of dollars)
2015
2014
2013
2012
China
$1,263.4 China
$1,244.3
China
$1,268.9
China
$1,220.4
Japan
1,215.7
Japan
1,230.9
Japan
1,182.5
Japan
1,111.2
Carib Bnkng
295.5
Belgium
335.4
Carib Bnkng
290.9
Carib Bnkng
268.3
Ctrs
Ctrs
Ctrs
Oil
292.9
Oil Exporters 285.9
Belgium
256.8
Oil Exporters
262.0
Exporters
Brazil
262.7
Carib Bnkng
272.4
Brazil
245.4
Brazil
253.3
Ctrs
Belgium
228.9
Brazil
255.8
Oil
238.3
Taiwan
195.4
Exporters
Switzerland
215.8
Ireland
202.0
Taiwan
182.2
Switzerland
195.4
Ireland
215.7
Switzerland
190.1
Switzerland
175.1
Russia
161.5
United
194.8
United
188.9
United
163.6
Luxembourg
154.7
Kingdom
Kingdom
Kingdom
Hong Kong
783.1
Taiwan
174.4
Hong Kong
158.8
Hong Kong
141.9
Luxembourg 171.0
Hong Kong
172.6
Russia
138.6
Belgium
138.8
Taiwan
170.3
Luxembourg
171.8
Luxembourg
134.4
United
132.6
Kingdom
India
110.3
Singapore
110.0
Ireland
125.1
Ireland
103.1
Singapore
109.7
Russia
86.0
Norway
97.2
Singapore
99.3
Mexico
87.4
Mexico
84.8
Singapore
86.2
Norway
75.1
Turkey
77.8
India
83.0
India
68.5
Canada
66.2
Germany
76.3
Norway
81.6
Germany
67.2
Germany
63.2
France
75.0
France
79.2
Mexico
65.1
Mexico
61.1

18 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

2015
2014
2013
2012
Canada
72.5
Turkey
77.0
Canada
55.7
India
59.5
Korea
71.8
Germany
72.7
Korea
53.9
Turkey
57.6
Norway
66.6
Canada
69.0
France
53.6
Thailand
53.6
Russia
66.5
Korea
68.3
Turkey
52.2
France
51.4
Philippines
39.4
Philippines
40.6
Thailand
51.7
Korea
47.6
Sweden
38.9
Sweden
39.6
Philippines
40.2
Philippines
36.8
Netherlands
37.6
Netherlands
36.2
Netherlands
36.9
Chile
33.0
Colombia
35.6
Colombia
34.7
Sweden
33.9
Netherlands
32.0
Australia
33.8
Australia
34.5
Australia
33.8
Poland
31.5
Italy
32.7
Thailand
33.2
Colombia
33.0
Colombia
30.2
Spain
31.4
Italy
31.9
Poland
30.9
Sweden
27.8
Thailand
29.0
Kazakhstan
31.6
Italy
30.3
Italy
27.5
Chile
28.3
Spain
27.7
Chile
26.1
Spain
27.4
Poland
27.6
Poland
27.7
Israel
23.7
Australia
27.4
Kazakhstan
27.1
Chile
25.5
Spain
23.0
Israel
24.1
Israel
20.9
Israel
25.2
Peru
14.8
Malaysia
19.3
Denmark
16.4
Denmark
16.7
Denmark
14.5
Peru
14.5
Vietnam
13.4
Vietnam
14.0
Malaysia
11.8
Denmark
13.8
Peru
10.8
Peru
10.9
South Africa
11.3
South Africa
13.1
South Africa
10.3
South Africa
9.3
Uruguay
10.7
All Other
242.4
All Other
180.4
All Other
180.5
All Other
208.0
Grand Total
$5,573.8
Grand Total
$6,137.3 Grand Total
$6,156.0
Grand Total
$5,794.9










Of which:

Of which:

Of which:
Of which:


For. Official
4,132.2
For. Official
4,113.1
For. Official
4,054.4
For. Official
4,032.2
Treasury
367.6
Treasury Bil s 335.3
Treasury Bil s 398.3
Treasury Bil s
372.7
Bil s
T-Bonds &
3,764.6
T-Bonds &
3,777.8
T-Bonds &
3,656.1
T-Bonds &
3,659.5
Notes
Notes
Notes
Notes
Source: U.S. Department of the Treasury. Data represent estimated foreign holdings of U.S. Treasury
marketable and non-marketable bil s, bonds, and notes. Data represent totals as of the end of December of the
year indicated, except for 2015, which is the value at the end of the first quarter.
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.
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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%
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%
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Total outstanding
Foreign owned
Percent foreign owned
2000
34,918
3,576
10.2%
Source: Griever, Wil iam 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.19 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 could spread quickly 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. In turn, inflation concerns quickly spread to markets in Europe and Asia, where equity
prices fell as well.20
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.

19 For a longer presentation of this topic, seeCRS Report RL34319, Foreign Ownership of U.S. Financial Assets:
Implications of a Withdrawal, by James K. Jackson, Foreign Ownership of U.S. Financial Assets: Implications of a
Withdrawal, by James K. Jackson.
20 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.
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liabilities to foreigners by U.S. banks likely reflected tight credit conditions, which proved 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,21 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.”22
In a May 2004 publication,23 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
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.”24
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

21 World Economic Outlook, International Monetary Fund. Washington, DC, April 2006.
22 World Economic Outlook, International Monetary Fund. Washington, DC, April 2004. pp. 69-70.
23 The Challenges of Narrowing the U.S. Current Account Deficit. OECD Economic Outlook No. 75, May 2004.
Available at http://www.oecd.org/dataoecd/4/58/31920358.pdf.
24 Ibid., p. 31.
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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
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 2008-2009 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.25


25 Jackson, International Capital Flows Following the September 11 Attacks.
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Author Contact Information

James K. Jackson

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

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