U.S. Debt to China: How Much Is It, and Why? (2024)

FAQs

How much does us owe China and why? ›

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.

Key Takeaways

China, which owns an estimated $972 billion in U.S. Treasuries, is the number-two investor among foreign governments.

If China were to begin dumping US debt, this could trigger a sell-off in the bond market, sending US interest rates higher and potentially hurting economic growth.

The national debt enables the federal government to pay for important programs and services even if it does not have funds immediately available, often due to a decrease in revenue. Decreases in federal revenue coupled with increased government spending further increases the deficit.

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.

Japan held $1.08 trillion in Treasury securities as of November 2022, beating out China as the largest foreign holder of U.S. debt.3 The low and negative yield market in Japan makes holding U.S. debt attractive.

The share of U.S. government debt belonging to China has dropped below $1 trillion — the lowest level in 12 years. China has been a big buyer of U.S. debt. So what's behind the change?

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.

China, Japan again sell US debt; China's holdings hit 12-year low - Global Times.

This is why China purchases US Treasuries: to run trade surpluses and avoid higher debt/unemployment — not, as many think, to “help” American consumers so that they can purchase more Chinese imports.

Can China call in U.S. debt? ›

Key Takeaways. Whether you're an American retiree or a Chinese bank, American debt is considered a sound investment. The Chinese yuan, like the currencies of many nations, is tied to the U.S. dollar. Because of varying maturities dates, China would be unable to call in all its Treasury holdings at once.

Yu Yongding, a member of the Academic Divisions of the Chinese Academy of Social Sciences, said China's reduction in its holdings of US Treasury bonds is a measure to adjust the country's balance sheet of overseas assets, which can enhance the security of its overseas assets and increase the net returns on overseas ...

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. This would be, as the saying goes, "too much money chasing too few goods."

Because the United States runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. That includes funding for social safety net programs, interest on the national debt and salaries for troops.

If the debt ceiling binds, and the U.S. Treasury does not have the ability to pay its obligations, the negative economic effects would quickly mount and risk triggering a deep recession. The economic effects of such an unprecedented event would surely be negative.

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

President Andrew Jackson Cuts Debt to Zero

By selling federally owned western lands and blocking spending on infrastructure projects, Jackson paid off the national debt after six years in office. This actually created a government surplus that Jackson divided among indebted states.

As of December 2022 (estimated), the intragovernmental debt was $6.18 trillion of the $31.4 trillion national debt. Of this $6.18 trillion, $2.7 trillion is an obligation to the Social Security Administration.

Get ready for this statistic – China owns 981 billion dollars in U.S debt. That means we owe China nearly a trillion dollars!

How much richer is China than the US? ›

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.

Those with the highest external debt to China are Pakistan $77.3 billion, Angola $36.3 billion, Ethiopia $7.9 billion, Kenya $7.4 billion and Sri Lanka $6.8 billion.

China owns roughly 384,000 acres of U.S. agricultural land, according to a 2021 report from the Department of Agriculture. Of that, 195,000 acres, worth almost $2 billion when purchased, are owned by 85 Chinese investors, which could be individuals, companies or the government.

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.

It might appear impossible, but many consumers succeed in living their entire lives without any debt. People of a variety of ages and income levels have made this choice. It's not an easy feat, but if it's something you truly want, don't let naysayers talk you out of it.

Economists say consequences of a default on the national debt could include higher interest rates, a stock market crash, a recession and massive job losses.

1837: Andrew Jackson

This resulted in a huge government surplus of funds. (In 1835, the $17.9 million budget surplus was greater than the total government expenses for that year.) By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off.

Foreign ownership of U.S. debt, which includes both governments and private investors, is much higher now than it was 50 years ago. In 1970, total foreign holdings accounted for $4.9 billion, or just 5 percent, of DHBP. As of December 2021, such holdings made up $7.7 trillion, or one-third, of public 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.

Why does the world owe China so much money? ›

Much of the debt owed to China relates to large infrastructure projects like roads, railways and ports, and also to the mining and energy industry, under President Xi Jinping's Belt and Road Initiative.

The demand for Chinese products—tea, porcelain, silk, and nankeen (a coarse, strong cotton cloth)—continued after the Revolution. Having seen the British make great profits from the trade when the colonies were prevented from direct trade with China, Americans were eager to secure these profits for themselves.

The resources include manufactured goods, infrastructure, technology, and natural resources, as well as human capital and labor. There has been an increase in demand for the Chinese currency, which stimulated commercial bank lending and finally increased the money supply.

United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%.

The United States is the richest country in the world with the highest GDP, as of 2021. China is the second richest country in the world with a $17.734 trillion GDP.

Economic reforms led to higher efficiency in the economy, which boosted output and increased resources for additional investment in the economy. China has historically maintained a high rate of savings.

It supports US jobs.

While expanding foreign trade can disrupt US employment, trade with China also creates and supports a significant number of American jobs. Exports to China support over 1 million US jobs, and Chinese companies invested in the United States employ over 160,000 workers.

What does China need from the US? ›

Aircraft, soybeans, motor vehicles and microchips are top U.S. exports to China. Since 2001, the share of these exports going to China has increased sharply. Soybeans and motor vehicles are targets of recent Chinese tariffs. Production of these two exports is geographically concentrated.

In modern history, the U.S. has never defaulted on its debt. The debt ceiling is the self-imposed limit on how much debt Congress allows the federal government to have. If Congress does not raise or suspend the debt ceiling, the U.S. could default on its debt, which would also impact financial markets and the economy.

The $31 trillion gross federal debt equals debt held by the public plus debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself. Learn more about different ways to measure our national debt.

The $31 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.