Many worry that China’s ownership of U.S. debt affords China economic leverage over the United States. This apprehension, however, stems from a misunderstanding of sovereign debt and of how states derive power from their economic relations. The purchasing of sovereign debt by foreign countries is a normal transaction that serves several legitimate economic policy goals. Consequently, China’s stake in U.S. debt has more of a binding than a dividing effect on bilateral relations between the two countries.
Even if China wished to “call in” its loans, the use of credit as a coercive measure is complicated and often heavily constrained. A creditor can only dictate terms for the debtor country if that debtor has no other options, but U.S. debt is a widely held and extremely desirable asset in the global economy. Whatever debt China does sell is likely to be simply purchased by other countries. In fact, China’s known holdings of U.S. debt have gradually declined after peaking in the mid-2010s, and Japan and the United Kingdom have overtaken China as the top holders of U.S. debt.
Furthermore, China needs to maintain significant reserves of U.S. debt to manage the exchange rate of the renminbi. Were China to suddenly unload its reserve holdings, its currency’s exchange rate would rise, making Chinese exports more expensive in foreign markets. As such, China’s holdings of U.S. debt do not provide China with undue economic influence over the United States.
A Deep Dive into America’s Biggest Foreign Creditors in 2025
Have you ever wondered who America owes all that money to? Well you’re not alone! As someone who’s been following economic trends for years I’ve noticed that the question of “how much of US debt does China hold” keeps popping up in conversations. Today, we’re gonna break down the numbers and see exactly where the US stands with its biggest foreign creditor.
The Current State of China’s US Debt Holdings
As of July 2025, China holds approximately $730.7 billion in US Treasury securities. That’s a pretty massive number, but surprisingly, it’s not the biggest! China actually ranks as the third-largest foreign holder of US debt, behind Japan and the United Kingdom.
Let’s look at the top 5 countries that hold US debt as of July 2025
- Japan: $1,151.4 billion
- United Kingdom: $899.3 billion
- China: $730.7 billion
- Cayman Islands: $438.7 billion
- Belgium: $428.2 billion
It’s kinda fascinating to see that Japan holds nearly 60% more US debt than China does! This is a significant shift from historical patterns when China and Japan were much closer in their holdings.
The History of China’s US Debt Holdings
China’s ownership of US debt has actually fluctuated quite a bit over the years. Back in December 2000, China owned just $105.6 billion in Treasury securities This grew substantially over the next two decades
But here’s where it gets interesting – China’s share of foreign-owned US debt has actually been decreasing in recent years. From the data, we can see that China’s holdings have decreased from $776.5 billion in July 2024 to $730.7 billion by July 2025 – that’s a drop of approximately $45.8 billion in just one year!
Why Has China Reduced Its Holdings?
There’s several reasons why China might be reducing its US Treasury holdings:
- Economic Sanctions and Tensions: Political relationships between the US and China have been strained in recent years
- Diversification Strategy: China may be diversifying its foreign reserves
- Short-Term Capital Needs: Like many countries during economic uncertainty, China might need liquid assets
- Exchange Rate Management: Changes in China’s currency policy
I remember back in 2020, during the early pandemic days, China was one of several countries that sold off portions of their US Treasurys for short-term capital needs.
What Percentage of US Debt Does China Actually Own?
This is where many people get confused. While the raw numbers sound huge, China’s actual share of total US debt is relatively small.
As of July 2025, with China holding $730.7 billion out of the total foreign holdings of $9,158.7 billion, China owns approximately 8% of foreign-held US debt.
But foreign-held debt is only part of the picture! The total US debt is much larger than just the portion held by foreign entities. Based on the data from April 2024, foreign countries owned approximately $7.9 trillion in Treasury securities, which represented about 22.9% of the total US debt.
So if we do the math:
- China holds about 8% of foreign-owned US debt
- Foreign-owned debt is about 22.9% of total US debt
- Therefore, China holds approximately 1.8% of total US debt
That’s a lot smaller than most people think!
The Shift in Foreign Ownership of US Debt
It’s fascinating to see how the landscape of US debt ownership has changed. Between 2003 and 2011, Japan and China together held 44% or more of all foreign-owned US debt. However, as of 2023, they controlled only about 25% of foreign-owned debt.
The data shows a clear trend: while Japan has maintained or increased its Treasury holdings (from $1,093.5 billion in July 2024 to $1,151.4 billion in July 2025), China’s holdings have decreased.
Meanwhile, the United Kingdom has significantly increased its holdings, jumping from $733.5 billion in July 2024 to $899.3 billion by July 2025 – an increase of nearly $166 billion!
Types of US Debt China Holds
China, like other foreign investors, primarily purchases public debt in the form of Treasury bonds, bills, and notes. These are marketable securities that can be bought and sold on the open market.
The US offers two main types of debt:
- Public debt: Sold as Treasury securities to outside investors, including foreign governments
- Intragovernmental debt: What the government owes to its own programs (like Social Security)
Foreign governments like China mainly buy public debt because it’s tradable and considered one of the safest investments in the world.
Why Does China Buy US Debt Anyway?
You might be wondering why China would want to hold so much US debt in the first place. There’s several strategic reasons:
- Safe Investment: US Treasury securities are among the world’s most secure assets
- Dollar Reserves: Holding US dollars helps with international trade
- Export Strategy: By buying US debt, China helps keep the dollar strong against the yuan, which helps Chinese exports remain competitive
- Portfolio Diversification: Treasury securities offer a stable component in China’s investment portfolio
For China, owning US Treasury securities has been a way to utilize their large trade surpluses with the US. When China sells more goods to the US than it buys, it ends up with dollars that need to be invested somewhere.
Is China’s Ownership of US Debt a Risk?
This is where things get complicated. There’s been lots of debate about whether China’s ownership of US debt represents a strategic risk to America.
Some potential risks include:
- Economic Leverage: China could theoretically threaten to dump US securities to influence policy
- Market Disruption: If China suddenly sold large amounts of US debt, it could raise interest rates
- Dependency Concerns: Reliance on foreign financing to cover US deficits
BUT – and this is a big but – most economists agree that these risks are often overblown. Here’s why:
- Mutual Assured Financial Destruction: If China dumped US Treasurys, they would harm the value of their own holdings
- Market Absorption: The global market for US Treasurys is enormous and could likely absorb even large sales
- China’s Own Interests: A destabilized US economy would harm China’s export-driven economy
So while it sounds scary in theory, the economic relationship between the US and China creates a kind of financial interdependence that acts as a stabilizing force.
Recent Trends in China’s US Debt Holdings
Looking at the monthly data from 2024-2025, we can see some interesting patterns in China’s holdings:
| Month | China’s Holdings (billions) |
|---|---|
| Jul 2024 | $776.5 |
| Aug 2024 | $774.6 |
| Sep 2024 | $772.0 |
| Oct 2024 | $760.1 |
| Nov 2024 | $768.6 |
| Dec 2024 | $759.0 |
| Jan 2025 | $760.8 |
| Feb 2025 | $784.3 |
| Mar 2025 | $765.4 |
| Apr 2025 | $757.2 |
| May 2025 | $756.3 |
| Jun 2025 | $756.4 |
| Jul 2025 | $730.7 |
There’s been a general downward trend, with a brief increase in February 2025, followed by a more significant drop in the most recent months. That July 2025 figure of $730.7 billion represents the lowest point in this time period.
How China Compares to Other US Debt Holders
While foreign countries own a significant portion of US debt, it’s worth remembering that most US debt is actually held domestically. As of April 2024, foreign entities owned about 22.9% of total US debt, which means domestic entities (including the Federal Reserve, mutual funds, pension funds, and individual investors) owned the remaining 77.1%.
Within the foreign holders, the distribution has become more diverse. Japan has maintained its position as the top foreign holder, while the UK has significantly increased its share. Other notable holders include tax havens like the Cayman Islands and Luxembourg, which likely represent investments from global financial institutions rather than the countries themselves.
What This Means for US-China Relations
The financial relationship between the US and China is just one aspect of their complex bilateral relationship. While China’s holdings of US debt give it some theoretical leverage, the practical reality is that both countries are economically interdependent.
We’ve seen China reduce its Treasury holdings somewhat, but not dramatically. This suggests a cautious approach rather than any kind of financial warfare. Both countries understand that economic stability serves their mutual interests, even when they disagree on other issues.
So to answer our original question – how much of US debt does China hold? – the answer is about $730.7 billion as of July 2025, representing roughly 8% of foreign-held US debt and less than 2% of total US debt.
While this is a significant amount, it’s far less than many people assume. China is not the largest foreign holder (Japan is), and its share has been declining in recent years as countries like the UK have increased their holdings.
The US-China financial relationship remains important, but the narrative of China “owning” America through debt is simply not accurate when you look at the actual numbers.
Why does China buy U.S. debt?
China buys U.S. debt for the same reasons other countries buy U.S. debt, with two caveats. The crippling 1997 Asian Financial Crisis prompted Asian economies, including China, to build up foreign exchange reserves as a safety net. More specifically, China holds large exchange reserves, which were built up over time due in part to persistent surpluses in the current account, to inhibit cash inflows from trade and investment from destabilizing the domestic economy.
China’s large U.S. Treasury holdings say as much about U.S. power in the global economy as any particularity of the Chinese economy. Broadly speaking, U.S. debt is an in-demand asset. It is safe and convenient. As the world’s reserve currency, the U.S. dollar is extensively used in international transactions. Trade goods are often priced in dollars, and due to their high demand, the dollar can easily be cashed in. Furthermore, the U.S. government has never defaulted on its debt.
A low-risk store of value
As sovereign debt is government-backed, private and public financial institutions view it as a low-risk asset with a high chance of repayment. Some government bonds are seen as riskier than others. A country’s external debt may be viewed as unsustainable relative to its GDP or its reserves, or a country could otherwise default on its debt. Generally, however, sovereign debt is more likely to return value and therefore is safer relative to other forms of investment, even if earned interest is not high.
How Much Of The U.S. Does China Own?
FAQ
Who is the largest holder of U.S. debt?
The largest holder of U.S. debt is the U.S. government itself, through the Federal Reserve System and other government trust funds like Social Security. As of March 2025, the Federal Reserve is the largest single holder of domestic debt, while intragovernmental holdings (debt the government owes itself) represent a significant portion of the total national debt.
Which country owes China the most money?
billion, largely from the China-Pakistan Economic Corridor (CPEC).
What percentage of US federal debt is held by China?
China owns approximately $859.4 billion in U.S. debt, about 2.6% of the total U.S. debt. Japan surpasses China as the top foreign holder of U.S. debt, with $1.1 trillion. The U.S. government itself holds the largest portion of U.S. debt, primarily through trust funds.
What happens if China calls in U.S. debt?