China holdings of U.S. debt fall below $1 trillion for the first time since 2010 (2024)

FAQs

Has China holdings of US debt fall below $1 trillion? ›

BEIJING/NEW YORK -- China's holdings of U.S. government debt have fallen below $1 trillion for the first time since 2010, with concerns about the risk of Russia-style sanctions possibly accelerating a long-term financial decoupling driven by political tensions.

Reducing holdings of Treasurys, a key component of Chinese foreign reserves, as part of an effort to diversify could help guard against the risk of similar sanctions being slapped on Beijing.

China used to be the biggest foreign owner of U.S. Treasury securities - but not anymore. Recently, China reduced its holdings of American government debt by more than 9% to less than $1,000,000,000,000. That's $981 billion, to be precise.

This value reflects a year-on-year (YoY) increase of $3.81 trillion, or 36.18%, compared to the $10.53 trillion recorded in 2022. The United States, holding the highest national debt globally, has a total of $31.68 trillion, representing a YoY increase of $1.3 trillion or 4.28%, reaching $30.38 trillion.

This was the highest budget deficit relative to GDP (9.9%) since 1945. The national debt increased by $1.9 trillion during FY2009, versus the $1.0 trillion increase during 2008.

Domestic Holders of Federal Debt

The Federal Reserve, which purchases and sells Treasury securities as a means to influence federal interest rates and the nation's money supply, is the largest holder of such debt.

Over the past 20 years, Japan and China have owned more US Treasuries than any other foreign nation. Between 2000 and 2022, Japan grew from owning $534 billion to just over $1 trillion, while China's ownership grew from $101 billion to $855 billion.

The US owes so much money to China because of the large trade and investment deficit the US currently has with China. This deficit is the result of a combination of factors, including rising wages and technology costs in the US, slow growth in the US economy, and US policies that favor the import of goods from China.

If China (or any other nation having a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.

Why doesn t China sell U.S. debt? ›

China reduced its holdings of US Treasury debt for the sixth straight month in January, which analysts said was mainly due to the US Federal Reserve's rate hikes and China's long-term security-driven diversification of its foreign exchange reserves.

America's debt has risen massively since the beginning of the 21st century, as "politicians from both parties have made a habit of borrowing money to finance wars, tax cuts, expanded federal spending, care for baby boomers, and emergency measures to help the nation endure two debilitating recessions," writes Jim ...

The countries with the biggest debt burdens in relative terms were Djibouti and Angola, followed by the Maldives and Laos, which opened a debt-laden railway line to China last year. The President of the World Bank, David Malpass, has called the level of debt “unsustainable” that many countries once again hold.

The value of U.S. Treasury securities held by residents of Russia amounted to 67 million U.S. dollars in January 2023, having declined by 89 percent from the previous month. Furthermore, in March 2020, the figure decreased sharply to 3.85 billion U.S. dollars, down from 12.6 billion U.S. dollars one month prior.

The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt. Individual investors and banks represent 15 percent of the debt. The Federal Reserve is holding 12 percent of the treasuries issued.

China's debt is nearly 44% of its GDP and its local governments owe nearly $5.14 trillion. With the economic slowdown and collapse of land sales revenue, provinces and local governments in China are facing an embarrassing situation.

When the government spends more than it earns, it has a budget deficit and must issue debt in the form of Treasury securities. The U.S. has run a deficit for the last 20 years, substantially increasing the national debt. In fact, according to the Department of the Treasury, the current debt is $31.4 trillion.

By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!

When was the last time the U.S. was debt free? January 1835 was the first and only time all of the government's interest-bearing debt was paid off, according to the Treasury Department.

What year did America have no debt? ›

As a result, the U.S. actually did become debt free, for the first and only time, at the beginning of 1835 and stayed that way until 1837. It remains the only time that a major country was without debt. Jackson and his followers believed that freedom from debt was the linchpin in establishing a free republic.

U.S. debt, long viewed as ultra-safe

A default could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze up and ignite an international crisis.

Japan's debt-to-GDP ratio is the highest in the world due to a prolonged period of economic stagnation and demographic challenges.

The debt was to be paid off in 50 annual repayments commencing in 1950. Some of these loans were only paid off in the early 21st century. On 31 December 2006, Britain made a final payment of about $83m (£45.5m) and thereby discharged the last of its war loans from the US.

Next to Great Britain, whose debt (funded in 1923) amounted to $4,577,000,000, the debt of France is the largest owed to the United States by any foreign power. Italy stands third with a debt, principal and accrued interest, of $2,097,347,122.82.

China and Japan are the largest foreign investors in American government debt. Together they own $2 trillion — more than a quarter — of the $7.6 trillion in US Treasury securities held by foreign countries.

At the end of 2021, of the 98 countries for whom data was available, Pakistan ($27.4 billion of external debt to China), Angola (22.0 billion), Ethiopia (7.4 billion), Kenya (7.4 billion) and Sri Lanka (7.2 billion) held the biggest debts to China.

Intragovernmental Debt

Intragovernmental holdings totaled more than $6.89 trillion in January 2023.1 Why would the government owe money to itself? Because some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they need.

United States - Federal Government; Net Worth (IMA), Level was -20997153.00000 Mil. of $ in July of 2022, according to the United States Federal Reserve.

If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.

Can U.S. companies take money out of China? ›

The limit for individuals is $50,000 USD per year, and the limit for businesses is $500,000 USD per year. Exceeding these limits can result in penalties and legal issues. It is important for expats to understand the legal methods for transferring money out of China to avoid any potential legal issues.

Japan is the second-largest foreign holder of U. S. debt after China, with holdings totaling nearly $1. 3 trillion in September 2020. Japan's large holdings of U. S. debt can be attributed to Japan's large trade surplus, low-interest rates, and limited investment opportunities in their own domestic markets.

A neologism, the term was first coined by Indian academic Brahma Chellaney in 2017, to allege that the Chinese government leverages the debt burden of smaller countries for geopolitical ends. However, other analysts have described the idea of a Chinese debt trap as a "myth" or "distraction".

The Fed tries to influence the supply of money in the economy to promote noninflationary growth. Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse.

If Congress doesn't raise the debt ceiling, the government can't borrow and might not be able to pay its bills (like bond interest) on time. That's called a default, and it's never happened before on this scale (though the U.S. got close in 2011).

Potential repercussions of reaching the ceiling include a downgrade by credit rating agencies, increased borrowing costs for businesses and homeowners alike, and a dropoff in consumer confidence that could shock the United States' financial market and tip its economy—and the world's—into immediate recession.

China has little overseas debt, and a high national savings rate. In addition, most of the debt is state owned – state-controlled banks loaned funds to state-controlled firms – giving the government the ability to manage the situation.

Three years of strict pandemic controls in China and a real estate crash have drained local government coffers, leaving authorities across the country struggling with mountains of debt. The problem has gotten so extreme that some cities are now unable to provide basic services, and the risk of default is rising.

Which country has the best economy? ›

On the other end of the spectrum, Brunei has the lowest debt to GDP ratio at 1.90%, followed by the Cayman Islands at 4.50%, Kuwait at 7.10%, and Afghanistan at 7.40%.

Debt securities accumulation at market and nominal value of Canadian general government, 2008 to 2021. Federal government net debt edged down in 2021 (-$4.1 billion) to $910.5 billion, still above pre-pandemic levels.

What that means. Russia has rapidly sold off the vast majority of its stash of American debt. Between March and May, Russia's holdings of US Treasury bonds plummeted by $81 billion, representing 84% of its total US debt holdings.

Exposure to unpaid Russian debt was highest in Italy and France, where upwards of $25 billion is owed each. In Austria and the U.S., exposure stood at $17.5 billion and $14.7 billion, respectively.

If China (or any other nation having a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.

The biggest effect of a broad scale dump of US Treasuries by China would be that China would actually export fewer goods to the United States. Overall, foreign countries each make up a relatively small proportion of U.S. debt-holders.

SHANGHAI/HONG KONG, March 10 (Reuters) - China's push to revive the economy this year by increasing infrastructure spending while warding off financial risks is facing headwinds from massive local-government debt, which is more than $9 trillion and growing.

Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China's holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities.

Who owns most of US debt? ›

The public holds over $24.53 trillion of the national debt, as of January 2023.1 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings ...

Japan and China have been the largest foreign holders of US debt for the last two decades. Japan and China held almost 50% of all foreign-owned US debt between 2004 and 2006. However, this has declined over time, and as of 2022 they controlled approximately 25% of foreign-owned debt.

China and Japan are the largest foreign investors in American government debt. Together they own $2 trillion — more than a quarter — of the $7.6 trillion in US Treasury securities held by foreign countries.

The US owes so much money to China because of the large trade and investment deficit the US currently has with China. This deficit is the result of a combination of factors, including rising wages and technology costs in the US, slow growth in the US economy, and US policies that favor the import of goods from China.