The United States has run up quite a credit card bill, so to speak, with no end in sight. The current U.S. national debt stands at $20.6 trillion, with foreign countries holding $6.4 trillion of that debt. Just who does Uncle Sam owe money? China and Japan have long been among the largest holders of U.S. debt, but dozens of countries have a stake in America’s debt, through U.S. Treasury bonds, bills and notes. Here are the top 10 holders of U.S. debt through December 2017, according to the U.S. Treasury Department.
10. Taiwan ($181 billion)
Although their trading partnership has diminished somewhat in recent years, the U.S. and the people on Taiwan retain close economic ties. And as Americans buy Taiwanese goods, Taiwan often returns that money to America by investing in U.S. debt.
9. Hong Kong ($195 billion)
That figure does not mean Hong Kong owns all that debt. Hong Kong is a major international banking center, and its banks sell U.S. securities to investors throughout Asia. These sales to outsiders can make it difficult to determine exactly how much debt a nation holds. As the U.S. Treasury site notes, “Since U.S. securities held in overseas custody accounts may not be attributed to the actual owners, the data may not provide a precise accounting of individual country ownership of Treasury securities.”
8. Luxembourg ($218 billion)
This tiny nation has the second-highest per-capita GDP in the world, almost $106,000 in 2016 according to the World Bank. So with money to invest, it’s no surprise many Luxembourgers enjoy the safety of U.S. securities. But much of that figure is what’s termed “custodial,” as foreigners take advantage of Luxembourg’s status as a tax haven to buy and sell Treasuries in that country.
7. Switzerland ($250 billion)
A 1934 Swiss law made it illegal for bankers there to share financial information, giving rise to the greatest tax haven in the world. A banking scandal there in recent years has changed all that; in 2017, Switzerland agreed to share financial account data for taxation purposes. Still, the country remains a magnet for offshore investments in Treasuries.
6. United Kingdom ($250 billion)
The UK’s debt holdings have increased more than 20 percent in the past year. The UK has had a part in U.S. debt from the very beginning; the American colonies ran up a $43 million debt fighting Great Britain in the Revolutionary War. As the first U.S. Treasury secretary, Alexander Hamilton, noted, “A national debt, if it is not excessive, will be to us a national blessing.”
5. Brazil ($257 billion)
One of the world’s largest economies, Brazil, like other leading economic powers, appreciates the safety of U.S. Treasuries. Those bonds have long been considered one of the safest — although not the most lucrative — investments in the world.
4. Cayman Islands ($270 billion)
It’s easy to imagine islanders in this picturesque Caribbean chain sitting at the beach, sipping a beverage, and using their smartphones to purchase U.S. Treasuries. Obviously, most of the U.S. debt the Treasury lists as “Cayman Islands” is held by outsiders, who want to maintain secrecy in their holdings. According to Bloomberg.com, the Caymans are the home of more hedge funds than anywhere else in the world.
3. Ireland ($327 billion)
This one is a bit surprising. According to MarketWatch.com, “Investors and analysts suspect Ireland appears as one of the U.S.’s largest creditors on paper because Google parent Alphabet and other American corporations like to hold their overseas profits in highly liquid Treasuries. These cash-rich firms want to avoid the 35% repatriation tax, but they don’t want to let the foreign-earned cash sit idly by.” Obviously, the tax reform bill passed late in 2017 will change the dynamics for many corporations looking to avoid American taxes.
2. Japan ($1.06 trillion)
Japan has been one of the top holders of U.S. debt for years, but late last year investors there were selling Treasuries and boosting investment in Europe. Such trends are cyclical.
1. Mainland China ($1.18 trillion)
China has topped this list almost exclusively since 2008, briefly losing the top spot twice to Japan, according to CNN. One of those moments came in 2016, as China sold off U.S. Treasuries, then used those dollars to buy its own fading currency, the yuan. While some worry that it’s harmful for China to hold this much economic leverage over the U.S. given the adversarial political climate between the two nations, some analysts believe it makes the two countries more dependent on each other.
As Forbes points out, while some are concerned that “China will dump all of these Treasuries at some point and crash the U.S. dollar, riding disaster to international supremacy. … there is no way China could unload U.S. debt without it ruining its own economy.” Still, the potential for trouble exists when a country has such a huge stake in American debt; earlier this year, financial analysts expressed concern about a report that Chinese officials were considering slowing, and possibly stopping, the purchase of U.S. Treasuries.