America is one of the largest economies in the world, but it is also one of the most indebted. The United States has an estimated $21 trillion in debt, with nearly $17 trillion of that held by the public. This debt is owed to a variety of lenders, including foreign governments and central banks, domestic households and businesses, and other government entities.
The largest foreign owner of U.S. debt is China, which holds approximately $1.2 trillion as of June 2020. China is followed by Japan, which owns an estimated $1.1 trillion worth of U.S. Treasury securities, much of it held in the form of long-term notes and bonds. Other major foreign holders include Brazil, Ireland, and the United Kingdom.
The largest domestic holder of U.S. debt is the Federal Reserve, which held an estimated $2.7 trillion as of June 2020. This figure includes holdings of both government securities owned outright by the Federal Reserve and those purchased under various asset purchase programs designed to stimulate economic activity during the Great Recession and its aftermath.
The Social Security Trust Funds are another major domestic holder of U.S. debt, with an estimated $2.3 trillion as of June 2020. The Social Security Trust Funds are funded by payroll taxes collected from workers and employers with money going into two separate accounts that pay for old-age and disability benefits for retired workers and their survivors or dependents.
The remaining $13 trillion in U.S. debt is held by a combination of domestic households and businesses, state and local governments, mutual funds, pension funds, insurance companies, private financial institutions, and other investors from around the world. In addition to these entities, there are also various federal agencies that hold portions of the public debt including Fannie Mae and Freddie Mac (government-sponsored entities), Ginnie Mae (guaranteed loan issuer), and TARP (Troubled Asset Relief Program).
How much do US owe China
The United States owes China a staggering amount of money. As of October 2020, the US national debt owed to China is estimated to be around $1.08 trillion, making China the largest foreign holder of US debt. This means that if all of the money owed to China was paid off at once, it would be enough to pay off 10% of the US national debt.
The US-China economic relationship has been strained in recent years, with President Trump imposing tariffs on Chinese imports and the Chinese government retaliating with its own tariffs. This has led to concerns that China may take steps to reduce its holdings of US debt in order to put pressure on the US economy. However, so far this has not happened and China remains one of the largest holders of US debt.
But why does the US owe so much money to China? A large portion of this debt is held in Treasury bonds. The US government borrows money from investors by issuing Treasury bonds, which are essentially loans that must be repaid over time with interest. China is one of the largest purchasers of these bonds because they offer a relatively safe and consistent return on investment. In addition, the Chinese government often uses these bonds as a way to keep its currency, the yuan, pegged to the dollar as part of its exchange rate policy.
In addition to Treasury bonds, other types of debt also contribute to the amount owed by the US to China. This includes debt from federal agencies like Fannie Mae and Freddie Mac, which purchase mortgages for homeowners in order to encourage home ownership. The Chinese government owns a large stake in both these agencies and thus benefits from their activities.
Finally, some of the debt owed by the US to China is held by private individuals and companies. Many Chinese companies and wealthy individuals invest in US stocks and bonds as a way to diversify their investments and earn higher returns than what they can get from domestic investments in China.
In short, the US owes China a huge amount of money for a variety of reasons. Although this debt has created tensions between the two countries in recent years, it is not likely that China will reduce its holdings of US debt any time soon since doing so would hurt both economies significantly.
Who owns the U.S. debt
The United States government is the largest holder of U.S. debt, but it’s not the only one. In fact, a number of entities—from foreign governments and central banks to private investors—own a chunk of the U.S. debt.
The U.S. Treasury Department is the largest holder of U.S. debt, accounting for $21 trillion as of April 2020. This includes all of the money the federal government has borrowed over the years, both from private investors and other countries, to fund its operations and pay its bills.
Foreign governments are also major holders of U.S. debt, owning about $6 trillion as of April 2020. China is the largest foreign holder, with about $1.1 trillion in Treasury securities, followed by Japan at $1 trillion and Ireland at $307 billion. Other major foreign holders include Brazil ($286 billion), Switzerland ($261 billion), and the United Kingdom ($205 billion).
The Federal Reserve System is also a significant holder of U.S. debt, with nearly $2 trillion in Treasury securities as of April 2020. The Fed purchases government bonds as part of its monetary policy to increase or decrease the money supply in the economy and influence interest rates.
In addition to these large holders, private investors such as mutual funds, pension funds, hedge funds, and individual investors also own U.S. debt in the form of Treasury securities. As of April 2020, they owned about $5 trillion in Treasury securities, nearly one-fourth of total outstanding public debt held by the public.
Overall, entities outside the federal government hold more than half (55%) of total U.S. debt held by the public—about $13 trillion—as of April 2020, while entities within the federal government—mainly the Treasury Department—hold about 45% or $11 trillion in U.S debt.. That’s why it’s important to remember that much of the U.S.’s debt isn’t just owed to itself; it’s owed to a variety of other entities as well