The United States government has been running massive fiscal deficits for years. To cover the shortfall in its budget, the government issues Treasury securities. The US government debt currently stands at a staggering $25.15 trillion. Much of the US Treasury securities are held by Americans – the Federal Reserve, mutual funds, hedge funds, pension funds, insurance companies, and other investors. But foreign governments and investors also hold a huge pile of the US government debt. Here we take a look at the ten largest foreign holders of the US Treasury securities.
Ranked: The largest foreign holders of the US Treasury securities
According to data from the US Department of the Treasury, foreign holders have accumulated $7.066 trillion worth of the US Treasury securities as of February 2020. Many of these holders have been buying the US government debt for decades.
The ranking is based on data from from the Department of the Treasury as of February 2020.
Jim O’Shaughnessy: Fear Signals Created By The Reptilian Brain
ValueWalk's Raul Panganiban interviews Jim O’Shaughnessy, Chairman, Co-chief Investment Officer, and Portfolio Manager at O’Shaughnessy Asset Management. In this part, Jim discusses the fear and emotional signals created by the reptilian brain. Q1 2020 hedge fund letters, conferences and more That's very cool. For the factor to try to seek the reason why it works, Read More
10- Belgium, $218 billion
Belgium held $218 billion worth of the Treasury securities at the end of February this year. That’s a significant increase from $181.3 billion in February 2019. Belgium owns more US government debt than many other leading economies such as France, India, and Saudi Arabia.
9- Cayman Islands, $219.4 billion
Surprised to see the Cayman Islands on this list? Don’t be. It’s a tax haven in the Caribbean Sea. The Cayman Islands have a population of only 60,000, but this group of tiny islands has tens of thousands of investment firms domiciled there purely to evade taxes. And many of these firms invest in the US Treasury securities.
8- Switzerland, $243.7 billion
Switzerland is one of the world’s most advanced countries, and the Swiss Franc is considered a reserve currency. It has increased its US debt holding from $224.1 billion in February 2019 to $243.7 billion at the end of February 2020. The country is also a major tax haven, even though several countries have been putting pressure on it to weaken its privacy laws.
7- Hong Kong, $249.8 billion
The Treasury Department has listed Hong Kong’s holdings separately from that of mainland China. Hong Kong is a semi-autonomous, special administrative region of China. As of February this year, Hong Kong holds $249.8 billion worth of Treasury securities. Some experts believe that Chinese government entities could be buying the Treasury securities via Hong Kong.
6- Luxembourg, $260.8 billion
Just like the Cayman Islands, Luxembourg is a tax haven. Hundreds of sovereign wealth funds, hedge funds, and other institutions use the landlocked nation as a front. They operate from Luxembourg without having to reveal their investment positions. Luxembourg holds $260.8 billion worth of the US Treasuries.
5- Ireland, $282.7 billion
Many of the largest foreign holders of the US debt are tax havens. Ireland is where Alphabet, Apple, Facebook, and dozens of other companies have set up their overseas headquarters to conveniently avoid repatriation taxes on their foreign profits. Ireland holds $282.7 billion of the US debt.
4- Brazil, $285.9 billion
Brazil’s own economy might not be in the best shape, but it is one of the largest foreign holders of the US debt. However, the South American country has reduced its holding from $307.7 billion in February 2019 to $285.9 billion in February 2020.
3- United Kingdom, $403.2 billion
The UK has significantly increased its US debt holdings from $302.5 billion in February 2019 to $403.2 billion in February 2020. The UK economy was already struggling with the consequences of Brexit, and the coronavirus pandemic has made things worse.
2- China, $1,092.3 billion
China is the second largest foreign holder of the US debt. Beijing appears to be trimming its exposure to the US debt. The February 2020 figure of $1,092.3 billion is China’s lowest holding of the US Treasuries in the last couple of years. It held $1,183.1 billion in May 2018. Beijing had been accumulating the US debt for decades to keep yuan undervalued against the dollar.
1- Japan, $1,268.3 billion
Japan holds a staggering $1,268.3 billion worth of the US debt, accounting for 18% of the total Treasury securities held by foreigners. Japan has been aggressively buying the US government securities, increasing its holding from $1,068.8 billion in February 2019 to $1,268.3 billion in February 2020. It’s the biggest increase in Japan’s holding since at least 2013.