China and Japan Hold $1.6 Trillion in U.S. Debt

Tuesday, August 17, 2010
(AP Photo)

Next time the White House appears to back down from a confrontation with China or Japan, keep in mind the following: these two Asian powerhouses control more than $1.6 trillion of the United States’ debt.

China possesses more Treasury securities than any other nation, with a value of $895 billion. Japan holds the second largest portion of the U.S. debt, with $766 billion in Treasury holdings.
The Congressional Research Service (CRS) notes the risk facing the U.S. government by having so much debt in foreign hands. In a recent report the CRS refers to the “potential for a financial crisis” resulting from a “coordinated withdrawal from U.S. financial markets staged by foreign investors for economic or political reasons….”
Fortunately, the CRS also notes: “A coordinated withdrawal from U.S. securities markets by foreign investors seems highly unlikely, particularly since the vast majority of the investors are private entities that presumably would find it difficult to coordinate a withdrawal.”
-Noel Brinkerhoff
Foreign Investment in U.S. Securities (by James K. Jackson, Congressional Research Service) (pdf)


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