Foreign Holdings of Federal Debt
Updated July 9, 2021
Congressional Research Service
https://crsreports.congress.gov
RS22331

Foreign Holdings of Federal Debt

Summary
This report presents current data on ownership of U.S. Treasury securities and major holders of
federal debt by country. Federal debt represents the accumulated balance of borrowing by the
federal government. The gross debt is composed of debt held by the public and intragovernmental
debt held by federal trust funds. To finance the publicly held debt, U.S. Treasury securities are
sold to investors. Treasury securities may be purchased directly from the Treasury or on the
secondary market by individual private investors; the Federal Reserve; financial institutions in the
United States or overseas; and foreign, state, or local governments.
As of December 2020, there was $21.6 tril ion of publicly held debt outstanding, up from $14.4
tril ion in December 2016, a $7.2 tril ion increase. During the same period, foreign holdings of
debt increased by $1 tril ion to a total of approximately $7.0 tril ion. After increasing for several
years, overal foreign holdings were relatively flat from 2013 to 2018 in dollar terms before
increasing in 2019 and 2020. Because the total debt has increased faster than the debt held by
foreigners has, the share of federal debt held by foreigners has declined in recent years. In
December 2020, foreigners held 33% of the publicly held debt. Interest on the debt paid to
foreigners in 2020 was $137.2 bil ion.
Foreign holdings can be divided into official (governmental investment) and private sources:
59.2% ($4.1 tril ion) of foreign holdings in U.S. federal debt are held by governmental sources;
private investors hold the other 40.8% ($2.8 tril ion).
Including private investors and governments, the top three estimated foreign holders of federal
debt by country, as of December 2020, are Japan ($1.2 tril ion), China ($1.1 tril ion), and the
United Kingdom ($0.4 tril ion). Based on these estimates, Japan holds approximately 17.7% of al
foreign investment in U.S. publicly held federal debt, China holds approximately 15.2%, and the
United Kingdom holds approximately 6.2%.
From an economic perspective, foreign holdings of federal debt can be viewed in the broader
context of U.S. savings, investment, and borrowing from abroad. For decades, the United States
has saved less than it invests. Domestic saving is composed of saving by U.S. households,
businesses, and governments. By accounting identity, when the government runs budget deficits,
it reduces domestic saving. By the same accounting identity, the shortfal between U.S. saving
and physical investment is met by borrowing from abroad. To be a net borrower from abroad, the
United States must run a trade deficit (i.e., it must buy more imports from foreigners than it sel s
in exports to foreigners). Borrowing from abroad has occurred through foreign purchases of both
U.S. government and U.S. private securities and other assets.
As a result of foreign purchases of Treasury securities, the federal government must send U.S.
income abroad to foreigners. If the overal economy is larger as a result of federal borrowing
(because the borrowing stimulated economic recovery or was used to productively add to the U.S.
capital stock, for example), then this outcome may leave the United States better off overal on
net despite the transfer of income abroad. In other words, without foreign borrowing, U.S. income
would be lower than it currently is net of foreign interest payments in this scenario.

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Selected Statistics on Foreign Holdings of
Federal Debt
Federal debt represents, in large measure, the accumulated balance of federal borrowing of the
U.S. government. The gross debt is composed of debt held by the public and intragovernmental
debt held by federal trust funds. Although gross federal debt is the broadest measure of the debt,
the debt measure that is relevant in an economic sense is debt held by the public. This is the
measure of debt that has actual y been sold in credit markets and has influenced interest rates and
private investment decisions. Intragovernmental debt, by contrast, is both an asset and a liability
to the federal government.
The portion of gross federal debt held by the public consists primarily of investment in
marketable U.S. Treasury securities (i.e., bil s, bonds, and notes traded in private markets).1
Investors in the United States and abroad include official institutions, such as the U.S. Federal
Reserve and foreign central banks; financial institutions, such as commercial banks; and private
individual investors.
Table 1 provides December 2020 data, available as of May 2021, on estimated ownership of U.S.
Treasury securities by type of investment and the percentage of that investment attributable to
foreign investors.2
The table shows that from December 2016 to December 2020, foreign holdings of debt increased
by $1 tril ion to approximately $7 tril ion. After increasing for several years, overal foreign
holdings were relatively flat from 2013 to 2018 in dollar terms before increasing in 2019 and
2020. During the same period, total publicly held debt increased by approximately $7.2 tril ion
from $14.4 tril ion to $21.6 tril ion. Because the total debt has increased faster than the debt held
by foreigners, the share of federal debt held by foreigners has declined in recent years. In
December 2020, foreigners held 33% of the publicly held debt.3 Interest on the debt paid to
foreigners in 2020 was $137.2 bil ion.4
Table 1. Estimated Ownership of U.S. Treasury Securities
(in tril ions of dol ars)
Foreign Holdings as a
End of
Total Publicly Held
Foreign Holdings of
Share of Total Publicly
Month
Debt
Publicly Held Debt
Held Debt
Dec. 2020
$21.6
$7.1
33%
Dec. 2019
$17.1
$6.7
39%

1 Figures on federal debt held by the public are available on the Department of the Treasury Bureau of Public Debt
website, “T he Debt to the Penny and Who Holds It,” http://www.treasurydirect.gov/NP/BPDLogin?application=np. See
CRS Report R44383, Deficits, Debt, and the Econom y: An Introduction , by Grant A. Driessen.
2 T his report discusses foreign holdings of U.S. federal debt. Foreign investors also hold U.S. private securities. For
data on foreign holdings of U.S. private securities, see “ Foreign Portfolio Holdings of U.S. Securities,”
http://www.treasury.gov/resource-center/data-chart -center/tic/Pages/fpis.aspx, produced by the T reasury Department
International Capital System.
3 Data are excerpted from the Federal Reserve Board of Governors Flow of Funds data, T able L.210. State, local, and
foreign holdings include special issues of nonmarketable securities to mun icipal entities and foreign official accounts.
T hey also include municipal, foreign official, and private holdings of marketable T reasury securities.
4 Bureau of Economic Analysis, International T ransactions, T able 4.3, line 39, https://apps.bea.gov/iT able/iT able.cfm?
ReqID=62&step=1. T here are no data available on interest on the debt paid to individual countries.
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Foreign Holdings as a
End of
Total Publicly Held
Foreign Holdings of
Share of Total Publicly
Month
Debt
Publicly Held Debt
Held Debt
Dec. 2018
$16.1
$6.3
39%
Dec. 2017
$14.8
$6.2
42%
Dec. 2016
$14.4
$6.0
42%
Source: Federal Reserve Board of Governors Flow of Funds, Table L.210 Treasury Securities, June 10, 2021,
http://www.federalreserve.gov/releases/z1/. December 2016 data come from the June 11, 2020 release, available
at https://www.federalreserve.gov/releases/z1/20200611/z1.pdf.
Note: To make data from Table L.210 consistent with other government sources, CRS subtracted debt held by
federal government employee defined benefit retirement funds (lines 5 and 10) from Table L.210.
Data on major foreign holders of federal debt by country are provided in Table 2. The top three
estimated foreign holders of federal debt by country, ranked in descending order as of December
2020, are Japan ($1.2 tril ion), China ($1.1 tril ion), and the United Kingdom ($0.4 tril ion).
Based on these estimates, Japan holds approximately 17.7% of al foreign investment in U.S.
privately held federal debt, China holds approximately 15.2%, and the United Kingdom holds
approximately 6.2%.5 While Japan and China remain, by far, the largest holders of federal debt,
their holdings have fal en since 2016 as a share of total foreign holdings.
Table 2. Top 10 Foreign Holders of Federal Debt, by Country
(data current as of May 11, 2021)

As of December 2020

As of December 2016
Percentage of
Percentage of
all foreign
all foreign
Amount held
holdings in
Amount held
holdings in
Country
($ billions)
federal debt
Country
($ billions)
federal debt
Japan
$1,251.3
17.70%
Japan
$1,090.8
18.17%
Mainland China
$1,072.3
15.17%
Mainland China
$1,058.4
17.63%
United Kingdom
$440.6
6.23%
Ireland
$288.2
4.80%
Ireland
$318.1
4.50%
Cayman Islands
$261.3
4.35%
Luxembourg
$287.7
4.07%
Brazil
$259.2
4.32%
Brazil
$258.3
3.65%
Switzerland
$230.0
3.83%
Switzerland
$255.5
3.61%
Luxembourg
$224.3
3.74%
Belgium
$253.5
3.59%
United Kingdom
$217.2
3.62%
Taiwan
$235.4
3.33%
Hong Kong
$191.4
3.19%
Hong Kong
$224.1
3.17%
Taiwan
$189.3
3.15%
Total top 10

Total top 10
countries of
countries of
foreign investors
$4,596.8
65.0%
foreign investors
$4,010.1
66.8%
in federal debt
in federal debt

5 Foreign holdings are estimated by the T reasury Department based on the location of the holdings, not the nationality
of the holder.
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Foreign Holdings of Federal Debt

As of December 2020

As of December 2016
Percentage of
Percentage of
all foreign
all foreign
Amount held
holdings in
Amount held
holdings in
Country
($ billions)
federal debt
Country
($ billions)
federal debt
Total al foreign

Total al foreign
investment in
$7,070.8
100%
investment in
$6,002.8
100%
federal debt
federal debt
Source: Treasury Department International Capital System (TIC), http://www.treasury.gov/resource-center/
data-chart-center/tic/Documents/mfhhis01.txt.
Notes: Data, including estimated foreign holders of federal debt historical y by month, in these Treasury
Department tables are periodical y adjusted. Current monthly estimates are available at http://www.treas.gov/tic/
mfh.txt. Aggregate data totals in Table 1 vary slightly from aggregate data totals in Table 2 because of minor
technical differences between the two sources. Percentage approximations calculated by CRS. Percentages may
not sum to 100% due to rounding.
Foreign holdings can be divided into official (government/central bank) and private sources.
Figure 1 provides data on the current breakdown of estimated foreign holdings in U.S. federal
debt. As the figure shows, 59.2% ($4,186.57 bil ion) of foreign holdings in U.S. federal debt are
held by governmental sources. Private investors hold the other 40.8% ($2,884.3 bil ion).
Figure 1. Breakdown of Official vs. Private Foreign Holdings of U.S. Federal Debt

Source: Treasury Department International Capital System, http://www.treasury.gov/resource-center/data-
chart-center/tic/Documents/mfhhis01.txt.
Notes: Data in the chart represent estimated December 2020 figures and are current as of May 2021. Figures
are in bil ions of dol ars. Data in the Treasury Department tables are periodical y adjusted. For the most current
estimates, click on the URL address listed above.
The breakdown between estimated official and private holdings is not publicly available on a country-by-country
basis. Approximate percentages calculated by CRS.
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Foreign Holdings of Federal Debt

Foreign Investment in U.S. Federal Debt:
Why Is It an Issue of Concern?
From an economic perspective, foreign holdings of federal debt can be viewed in the broader
context of U.S. saving, investment, and borrowing from abroad. For decades, the United States
has saved less than it invests. Domestic saving is composed of saving by U.S. households,
businesses, and governments. By accounting identity,6 when the government runs budget deficits,
it reduces domestic saving. By the same accounting identity, the shortfal between U.S. saving
and physical investment is met by borrowing from abroad. When the deficit rises (i.e., public
saving fal s), U.S. investment must fal (referred to as the deficit crowding out investment) or
borrowing from abroad must rise. If capital were fully mobile and unlimited, a larger deficit
would be fully matched by greater borrowing from abroad, and there would be no c rowding out
of domestic investment. To be a net borrower from abroad, the United States must run a trade
deficit (i.e., it must buy more imports from foreigners than it sel s in exports to foreigners).7 Since
2000, U.S. borrowing from abroad and the trade deficit have each exceeded $300 bil ion each
year. Borrowing from abroad peaked at about $800 bil ion in 2006 and was over $600 bil ion in
2020. Borrowing from abroad has occurred through foreign purchases of both U.S. government
and U.S. private securities and other assets.
As a result of foreign purchases of Treasury securities, the federal government must send U.S.
income abroad to foreigners. If the overal economy is larger as a result of federal borrowing
(because the borrowing stimulated economic recovery8 or was used to productively add to the
U.S. capital stock, for example), then this outcome may leave the United States better off overal
on net despite the transfer of income abroad. In other words, without foreign borrowing, U.S.
income would be lower than it currently is net of foreign interest payments in this scenario.
It can be argued that the underlying long-term economic problem is the budget deficit itself and
not that the deficit is financed in part by foreigners. This can be il ustrated by the counterfactual:
Assume the same budget deficits and U.S. saving rates without the possibility of foreign
borrowing. In this case, budget deficits would have had a much greater crowding-out effect on
U.S. private investment, because only domestic saving would have been available to finance both.
The pressures the deficit has placed on domestic saving would have pushed up interest rates
throughout the economy and caused fewer private investment projects to be profitably
undertaken. With fewer private investment projects, overal GDP would have been lower over
time relative to what it would have been. The ability to borrow from foreigners avoids the
deleterious effects on U.S. interest rates, private investment, and GDP, to an extent, even if it
means that the returns on some of this investment now flow to foreigners instead of Americans. In
other words, al else equal, foreign purchases of Treasury securities reduce the federal
government’s borrowing costs and reduce the costs the deficit imposes on the broader economy.
The burden of a foreign-financed deficit is borne by exporters and import-competing businesses,
because borrowing from abroad necessitates a trade deficit. It is also borne by future generations,

6 T he accounting identity is (household saving + business saving + government saving) + (borrowing from abroad -
lending to abroad) = (public investment + private investment).
7 By accounting identity, borrowing from abroad is equal to the current account deficit. T he trade deficit is the largest
component of the current account deficit.
8 For a discussion of how government deficits can stimulate the economy, see CRS Report R45723, Fiscal Policy:
Econom ic Effects, by Lida R. Weinstock.
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because future interest payments wil require income transfers to foreigners.9 To the extent that
the deficit crowds out private investment rather than being financed through foreign borrowing,
its burden is also borne by future generations through an otherwise smal er GDP. Because interest
rates are at historical y low levels, this burden has not grown significantly given the increase in
borrowing. Were rates to rise, however, the burden would rise with some lag as new borrowing
was made at the new higher rates and old borrowing matured and rolled over into new debt
instruments with higher rates.10
Thus far, this report has considered the impact of the government’s budget deficit and the low
U.S. saving rate on U.S. Treasury yields but not investor demand. Since interest rates fel to
historic lows at a time when the supply of Treasury securities rose to historic heights, it follows
that Treasury rates have been driven mainly by increased investor demand in recent years. In the
wake of the 2008 financial crisis and again during the COVID pandemic, investor demand for
Treasury securities increased as investors undertook a flight to safety. Treasury securities are
perceived as a safe haven compared with other assets because of low perceived default risk and
greater liquidity (i.e., the ability to sel quickly and at low cost) than virtual y any alternative
asset. For foreign investors, their behavior also implies that they view the risk from exc hange rate
changes of holding dollar-denominated assets to be lower than alternative assets denominated in
other currencies. The reasons for this flight to safety are varied. For example, investors who had
previously held more risky assets may now be more averse to risk and are seeking to minimize
their loss exposure, investors may not currently see profitable private investment opportunities
and are holding their wealth in Treasury securities as a store of value until those opportunities
arise, or investors may now need Treasury securities to post as collateral for certain types of
transactions (such as repurchase agreements) where previously other types of collateral could be
used (or used at low cost).
Flight-to-safety considerations have subsided as economic conditions have normalized, reducing
the incentive for foreigners to buy Treasuries and raising their yields, al else equal. But Treasury
securities are also sought out by international investors because of the dollar’s unique role as the
world’s reserve currency. As a result, Treasury securities are in permanent demand as underlying
collateral in financial transactions and as a temporary store of value while trade or financial
transactions are being executed.
More normal economic conditions would also be expected to increase domestic investment
demand, which would either push up domestic interest rates or lead to more foreign borrowing.
This relative movement in rates could attract additional foreign capital inflows.
Final y, any discussion of foreign holdings of Treasuries would be incomplete without a
discussion of the large holdings of foreign governments (referred to as foreign official holdings in
Figure 1).11 Foreign official holdings are motivated primarily by a desire for a liquid and stable
store of value for foreign reserves. Relatively few assets besides U.S. Treasury securities fil this
role wel . Depending on the country, foreign reserves may be accumulated as a result of a
country’s exchange rate policy, the desire to reinvest export proceeds, or the desire to build a war
chest to fend off speculation against the country’s exchange rate and securities. If motivated by
any of these factors, rate of return may be a lesser consideration for foreign governments than it is

9 See CRS Report RL30520, The National Debt: Who Bears Its Burden?, by Marc Labonte. Income transfers to
domestic debt holders have no net cost on the United States because they transfer income from one group of Americans
(taxpayers) to another (bond holders).
10 T he average maturity length of the outstanding debt is about five years.
11 Department of the Treasury, Major Foreign Holders of Treasury Securities, http://www.treasury.gov/resource-
center/data-chart -center/tic/Documents/mfh.txt.
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Foreign Holdings of Federal Debt

for a private investor, although large, foreign official holdings have not been significantly
increasing since 2013 after more than a decade of rapid growth before then.
Since 1986, the United States has had a net foreign debt, and that debt grew to $14 tril ion in
2020. The growth in net foreign debt would be unsustainable in the long run, meaning that it
cannot continuously grow faster than GDP, as it has general y done in recent decades. This net
foreign debt has not imposed any burden on Americans thus far, however, because the United
States has consistently earned more income on its foreign assets than it has paid on its foreign
debt, even though foreigners owned more U.S. assets than Americans owned foreign assets.
Although it is likely that the United States would begin to make net debt payments to foreigners
at some point if the net foreign debt were to continue to grow, it has not occurred yet. To date, the
primary drawback is the risk that its unsustainable growth poses, although that risk is slight in the
short run. Unsustainable growth in the net foreign debt could lead to foreigners at some point
reevaluating and reducing their U.S. asset holdings. If this happened suddenly, it could lead to
financial instability and a sharp decline in the dollar’s value. Alternatively, were the growth in the
debt to decline gradual y, it is unlikely to be destabilizing.12
A related concern is whether the major role of foreigners in Treasury markets adds more risk to
financial stability. In other words, would financial stability be less at risk if the United States
borrowed the same amount from foreigners, but foreigners invested exclusively in private
securities instead of U.S. Treasury securities? Empirical evidence does not shed much light on
this question, although the fact that some foreign crisis countries, such as Ireland, had
accumulated mainly private, not government, debts might suggest that avoiding foreign
ownership of government debt is not a panacea. Although countries such as Greece with large
foreign holdings of government debt have experienced financing problems, a large share of
Italy’s large government debt was held domestical y, and it has nevertheless faced financing
problems. The major role of foreign governments as holders of U.S. Treasuries could reduce
financial instability if foreign governments are less motivated by rate-of-return concerns, because
that implies they would be less likely to sel their holdings if prices started to fal . Final y, foreign
official holdings of U.S. debt may have foreign policy (as opposed to economic) implications that
are beyond the scope of this report.
What policy options exist if policymakers decided foreign ownership of federal debt is
undesirable? Absent strict capital controls, it is unlikely that foreigners could effectively be
prevented from buying Treasury securities. After Treasury securities are initial y auctioned by
Treasury, they are traded on diffused and international secondary markets, and turnover is much
higher on secondary markets than on initial auctions. A foreign ban on secondary markets would
be hard to enforce because secondary market activity could shift overseas, and even if it could be
enforced, the U.S. saving-investment imbalance would likely shift foreign investment into other
U.S. securities—perhaps even newly created financial products that al owed foreigners to
indirectly invest in Treasury securities. Thus, a ban would not address the underlying economic
factors driving foreign purchases. Economical y, the only way government could reduce its
reliance on foreign borrowing is by raising the U.S. saving rate, which could be done most
directly by reducing budget deficits. Reducing deficits too quickly could be counterproductive,
however, if it undermined the economic recovery.

12 T he “safe haven” role of T reasuries and “reserve currency” role of the dollar have led to counterintuitive outcomes—
lower T reasury yields in response to U.S. events with systemic risk potential, such as the subprime mortgage crisis and
the federal debt downgrade. T hese counterintuitive outcomes make it even harder to accurately predict when the debt
might become unsustainable and perhaps make a destabilizing reversal of capital flows less likely compared with other
countries.
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Foreign Holdings of Federal Debt

Author Information

Marc Labonte
Jared C. Nagel
Specialist in Macroeconomic Policy
Senior Research Librarian

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RS22331 · VERSION 40 · UPDATED
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