Foreign Ownership of U.S. Treasury Holdings
The United States government borrows money by issuing Treasury securities to cover the deficit between revenue—collected through taxes and other sources—and its spending on defense, welfare programs, interest, and more. As of January 23, 2025, the total U.S. national debt stands at a staggering $36.22 trillion. A significant portion of this debt is held by foreign countries, with Japan, China, the United Kingdom, Luxembourg, and the Cayman Islands leading the pack as of November 2024.
Understanding U.S. National Debt
The Bureau of the Fiscal Service classifies national debt into two main categories: intragovernmental debt and public debt. Intragovernmental debt is the portion of debt held within U.S. federal agencies and entities, accounting for about one-fifth of the total debt. This includes funds owed to Social Security, Medicare, military retirement programs, and other federal retirement funds.
The remaining four-fifths constitute public debt, which is held by a variety of entities, including foreign governments, U.S. banks, individual investors, the Federal Reserve, state and local governments, mutual funds, pension funds, insurance companies, and holders of savings bonds. As of January 2025, $28.88 trillion of the national debt is publicly held.
Top 5 Foreign Holders of U.S. Debt
1. Japan
Japan is the largest foreign holder of U.S. debt, owning approximately $1.09 trillion in Treasury securities as of November 2024. The strong economic relationship between the U.S. and Japan has made these investments a stable and strategic choice for the Japanese government and investors.
2. China
China, often highlighted in political debates regarding U.S. debt ownership, ranks as the second-largest foreign holder with $768.6 billion in Treasury securities. As a major export-oriented economy, China invests in U.S. debt to stabilize its currency and promote economic growth. Holding U.S. Treasuries helps China maintain the value of its foreign exchange reserves while keeping its exports competitive in the global market.
3. United Kingdom
The United Kingdom follows closely behind China, holding $765.6 billion in U.S. debt as of November 2024. The U.K.’s significant investment in U.S. Treasuries may be linked to economic challenges and a need for stable, liquid assets in its financial system.
4. Luxembourg
Luxembourg, despite its small size, is the fourth-largest holder of U.S. debt, possessing $424.5 billion in Treasury securities. Known as a global tax haven, Luxembourg attracts significant foreign investments, which are then channeled into various assets, including U.S. Treasuries. The country boasts one of the highest GDPs per capita, at $128,678 as of 2023, underscoring its role as a major financial hub.
5. Cayman Islands
The Cayman Islands, another well-known tax haven, rounds out the top five with $397 billion in U.S. Treasury holdings. Many hedge funds and investment firms are headquartered in the Cayman Islands, using it as a base to manage large financial assets, including U.S. government debt.
Who Else Owns U.S. Debt?
Apart from foreign governments, U.S. national debt is held by domestic investors, banks, mutual funds, pension funds, insurance companies, and state and local governments. Additionally, various U.S. federal agencies hold Treasury securities as part of their internal financial management, a segment classified as intragovernmental debt.
Why Is the National Debt So High?
The primary reason for the high national debt is the persistent budget deficit, where government spending surpasses revenue. The national debt is an accumulation of these annual deficits, driven by various factors including military expenditures, social welfare programs, tax cuts, and emergency relief spending, such as the response to the COVID-19 pandemic.
Why Does the U.S. Owe Debt to China?
China purchases U.S. debt because Treasury securities offer a low-risk and stable investment opportunity. Moreover, holding U.S. debt helps China keep the value of its own currency, the yuan, competitive against the U.S. dollar. By doing so, Chinese exports remain attractive to global markets, boosting its economy.
The Bottom Line
U.S. Treasury securities are among the most secure and liquid assets in the world, making them a preferred investment for both domestic and international investors. As a result, many countries—including Japan, China, the U.K., Luxembourg, and the Cayman Islands—hold substantial portions of U.S. debt. Despite concerns about rising national debt, these investments highlight the continued global confidence in the stability of the U.S. economy and its financial system.
