China would be among first paid under GOP debt limit plan, Treasury Secretary Yellen says (2024)

FAQs

Why did the US owe China so much money? ›

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.

According to usafacts.org, as of January 2023, Japan owned $1.1 trillion in US Treasuries, making it the largest foreign holder of the national debt. The second-largest holder is China, which owned $859 billion of US debt.

Venezuela is the country with the greatest sovereign debt exposure to China, in terms of direct lending (excluding portfolio holdings), according to AidData's 2021 study, totaling $74.7 billion.

Therefore, China's national debt has surged almost three times that of the United States in the past 12 months. In the third spot, Japan has a national debt of $13.36 trillion, indicating a drop of $1.49 trillion YoY.

How much money does the U.S. owe to China? China owns roughly $1.08 trillion worth of U.S. debt. 2 This amount is subject to market fluctuations. The value will change whenever China trades Treasury securities or when the prices of those bonds change.

Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP.

France. France has one of the largest debt levels in the world at $3.1 trillion dollars. Its debt to GDP ratio stands at 112%, with persistent primary budget deficits a prime cause of high debt levels. Economic growth has also been sluggish, adding to the increasing debt-to-GDP ratio.

Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S. This means that U.S. citizens own most of the national debt.

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

Its debt, long viewed as an ultra-safe asset, is a foundation of global commerce, built on decades of trust in the United States. A default could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze up and ignite an international crisis.

U.S. Debt: Visualizing the $31.4 Trillion Owed in 2023.

Why is the US in so much debt? ›

Flashpoints that greatly contributed to the debt over the past 50 years include the wars in Iraq and Afghanistan, the 2008 financial crisis and the 2020 COVID-19 pandemic -- the latter two prompting sweeping stimulus measures from Congress that cost trillions of dollars.

Overall, Chinese government debt is now equivalent to 102% of its GDP, the analysts estimated. That debt ratio is still lower than America's, which is currently about 122%, based on its national debt and GDP in 2022, but China's has grown at a staggering rate, more than doubling from 47% in 2016.

China's debt overhang far exceeds the burdens facing the United States. As recently as 2020, total debt in the United States relative to GDP exceeded China's. But as of mid-2022, China's relative debt burden stood 40 percent higher than America's.

Domestic ratings company China Chengxin International Credit Rating estimates the hidden debt of local governments was in a range of 52 trillion yuan to 58 trillion yuan at the end of 2022, about 1.5 to 1.7 times the amount of explicit debt.

While China and the US are comparable in nominal GDP, there are far more wealthy individuals in America than in China. China — with a population of 1.4 billion — has 780,000 people holding assets worth $1 million or more, while the US — with a population of 332 million — has 5.27 million people in the same category.

Foreign holders of United States treasury debt

Of the total 7.4 trillion held by foreign countries, Japan and Mainland China held the greatest portions, with China holding 859.4 billion U.S. dollars in U.S. securities.

When adding portfolio debts (including the $1 trillion of U.S. Treasury debt purchased by China's central bank) and trade credits (to buy goods and services), the Chinese government's aggregate claims to the rest of the world exceed $5 trillion in total.

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.

The United States has the world's highest national debt with $30.1 trillion owed to creditors as of the first quarter of 2023.

Which country owes the least debt? ›

According to data published by London-based investment fintech Invezz, Japan, Greece, Italy, Portugal, and the US are the top five nations with the highest level of government debt.

The amount of Japan's national debt in 2021 amounted to about 10.46 trillion U.S. dollar. In a ranking of debt to GDP per country, Japan is thus currently ranked first. With one of the largest gross domestic products (GDP), Japan is among the largest economies in the world.

A flurry of big spending packages and ballooning social welfare costs for a rapidly ageing population have left Japan with a debt pile 263% the size of its economy - double the ratio for the United States and the highest among major economies.

The U.S. has had debt since its inception. Our records show that debts incurred during the American Revolutionary War amounted to $75,463,476.52 by January 1, 1791. Over the following 45 years, the debt grew. Notably, the public debt actually shrank to zero by January 1835, under President Andrew Jackson.

The total “commercial” debt owed by France to the United States was given by M. Clémentel as $609,357,000.

The case of debts arising from World War II is somewhat less complicated. At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.

The US doesn't actually have to pay off its $31 trillion mountain of debt, according to top economist Paul Krugman, hitting back at the idea that government finances can be compared to household balance sheets in an op-ed weeks before the US possibly defaults on some obligations.

A sovereign default happens when a country's government fails to pay its debt obligations. A sovereign default can have serious economic consequences for the borrowing nation, making it harder and more expensive to borrow money in the future and pay its ongoing obligations.

To pay back one million dollars, at a rate of one dollar per second, would take you 11.5 days. To pay back one billion dollars, at a rate of one dollar per second, would take you 32 years. To pay back one trillion dollars, at a rate of one dollar per second, would take you 31,688 years.

What is the average debt per person in America? ›

The average American holds a debt balance of $96,371, according to 2021 Experian data, the latest data available.

The Congressional Budget Office (CBO) projects that interest payments will total $663 billion in fiscal year 2023 and rise rapidly throughout the next decade — climbing from $745 billion in 2024 to $1.4 trillion in 2033. In total, net interest payments will total nearly $10.6 trillion over the next decade.

What percentage of Americans are in debt? Just how many Americans are in debt? According to financial experts, the percentage of Americans in debt is around 80%. 8 in 10 Americans have some form of consumer debt, and the average debt in America is $38,000 not including mortgage debt.

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.

Household expenditure as a share of total GDP sat at about 38 percent by the end of 2021, far below the global average of 63 percent, leaving China with one of the weakest consumption levels among the world's major economies.

BEIJING, April 1, 2022— Over the past 40 years, the number of people in China with incomes below $1.90 per day – the International Poverty Line as defined by the World Bank to track global extreme poverty– has fallen by close to 800 million.

Economic growth hit 5.9% in 2021 - the fastest rate in nearly four decades - as pandemic reopenings fuelled consumer spending and job growth. Companies also had it good, enjoying unusually strong profits, despite facing higher costs for supplies.

On January 8, 1835, president Andrew Jackson paid off the entire national debt, the only time in U.S. history that has been accomplished.

Excessive debt can undermine economic performance when it is followed by transfers that are economically suboptimal. More importantly, these transfers can set off financial distress behavior that undermines subsequent growth, in many cases substantially.

Why does China owe U.S. debt? ›

Key Takeaways. China invests heavily in U.S. Treasury bonds to keep its export prices lower. China focuses on export-led growth to help generate jobs. To keep its export prices low, China must keep its currency—the renminbi (RMB)—low compared to the U.S. dollar.

Even so, in April 1938, the Nationalist government of China began to issue U.S.-dollar denominated bonds to finance the war against Japan's brutal invasion. Locked in a pitched battle for survival, the government issued these bonds into 1940.

Foreign holders of United States treasury debt

Of the total 7.4 trillion held by foreign countries, Japan and Mainland China held the greatest portions, with China holding 859.4 billion U.S. dollars in U.S. securities. Other foreign holders included oil exporting countries and Caribbean banking centers.

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.

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.

According to data from the Bureau of Economic Analysis , total US goods and services imports from China in 2022 were $564 billion; in 2018 they were only $558 billion. Total US goods imports alone from China in 2022 ($537 billion) remained slightly below 2018 levels ($539 billion) according to data from Census .

China's $23 Trillion Local Debt Crisis Threatens Xi's Economy - Bloomberg.

If the China bloc disposes of net foreign assets amounting to more than 20% of GDP by offloading US bloc bonds over 10 years, the IMF finds that the China bloc's domestic interest rates would fall by four basis points.

As an estimate, Chinese securities account for less than 2% of the total portfolio of U.S. investors.

In this graphic, Julie Peasley shows how many one-dollar bills it would take to stack up to the total U.S. debt of $31.4 trillion.

Why can't the US make money to pay off debt? ›

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.

About a third of the debt held by the public is held by foreign holders. Foreign countries hold a total of roughly $7.4 trillion of U.S. debt as of the end of June, the most recent month with available data. Japan is the largest holder with about $1.2 trillion in Treasury securities.

China loaned a total of $143 billion to African governments and state-owned enterprises between 2000 and 2017. In 2020, the African countries with the largest Chinese debt were Angola ($25 billion), Ethiopia ($13.5 billion), Zambia ($7.4 billion), the Republic of the Congo ($7.3 billion), and Sudan ($6.4 billion).

Of that $16 Trillion, over $9 Trillion is held in US pension funds, ETFs, Mutual Funds, and so on, with some $6 Trillion owed to foreign governments (sovereign funds), roughly $1 Trillion to China, $1.1 Trillion to Japan, and the rest in increments of less than $500 Billion to other foreign holders.