Who Owns US Treasury Securities?30 July, 2011, 17:16. Posted by Zarathustra
Tags: Economy, Treasury, United States
This issue has been cleared up here and there across the web, but there are still plenty of people who believe that US government debts are mainly held by foreigners, in particular, China.
This is more of a myth than fact.
Out of the US$14.3 trillion government debt, only US$4.514 trillion are held by foreign governments, which is roughly 32% of total debt, and of which US$1.1598 trillion is held by Chinese government in their foreign exchange reserve. That means the holdings of China is merely 8% or so of total holdings.
Now this graphic has been circulated around for a while here and there, but it is worth repeating here once more, by Société Générale (via Barry Ritholtz):
Source: Global Insight, SG Cross Asset Research/Economics
Here is the key point to clear up: the United States does not need China to fund itself. Chinese are accumulating US government debts as an automatic response towards trade surplus and capital inflow under their exchange rate arrangement which prevents Chinese Yuan from appreciating too quickly. As long as the surplus countries continue to run trade surplus and see capital inflow while unwilling to allow their currencies to float, they have to buy US Treasuries.