What happens if China sells all US debt?
If China (or any other nation that has a trade surplus with the U.S.) stops buying
It's going to put it into bonds of other countries. It will have to buy other currencies in order to invest in those countries' bonds. So US interest rates will no doubt rise as the supply of US Treasury bonds suddenly increases and the dollar will fall as China moves a lot of money out of dollars.
Selling Treasurys is a fast way to whip up U.S. dollars, and China will sometimes use extra dollars to go out on the global market and buy up their own currency. That artificially pumps up its value. It's like planting someone at an auction to drive up your prices.
China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country. Nations borrowing from each other may be as old as the concept of money.
Having no more debt means, that the government does not have to pay interest anymore. This can mean, that there is more money free to spend on other things like infrastructure or welfare.
China's debt overhang far exceeds the burdens facing the United States. As recently as 2020, total debt in the United States relative to GDP exceeded China's. But as of mid-2022, China's relative debt burden stood 40 percent higher than America's.
As a result, totals from January 2023 are lower than reported. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
Russia divested from all US bond instruments, the only debts the Federal government has, and still owes the US and other investors nearly 300 billion US Dollars. The national debt in Russia was forecast to increase between 2023 and 2028 by in total 16.1 billion U.S.
Domestic Holders of Federal Debt
The Federal Reserve, which purchases and sells Treasury securities as a means to influence federal interest rates and the nation's money supply, is the largest holder of such debt.
Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.
Why is the U.S. in so much debt?
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.
- Japan. Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP. ...
- United States. ...
- China. ...
- Russia.
Though trust funds are in place to support Social Security payments to recipients in the event of a debt default, they could be depleted if the United States enters into a debt default.
- Japan. Japan held $1.15 trillion in Treasury securities as of January 2024, beating out China as the largest foreign holder of U.S. debt. ...
- China. China gets a lot of attention for holding a big chunk of the U.S. government's debt. ...
- The United Kingdom. ...
- Luxembourg. ...
- Canada.
The federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone. Decreases in federal revenue are largely due to either a decrease in tax rates or individuals or corporations making less money.
| Characteristic | National debt in relation to GDP |
|---|---|
| Macao SAR | 0% |
| Brunei Darussalam | 2.06% |
| Kuwait | 3.08% |
| Hong Kong SAR | 4.27% |
China's debt has risen dramatically in the past decade, largely the result of credit fed to state-owned enterprises in the wake of the global financial crisis.
Most of this debt came from building infrastructure, much of which is unlikely to generate revenues sufficient to pay off the obligations. With China's trend growth rate notably lower now than it was, it leaves a burden over the long haul.
On the other hand, Mexico holds about $34B of US debt. So if we were to make a balance, Mexico owes the US $134B, more or less, or about 8% of what it makes in a year. The United States has a services trade surplus of an estimated $8.8 billion with Mexico in 2018, up 19.1% from 2017.
What is one real concern about a large national debt?
A nation saddled with debt will have less to invest in its own future. Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth.
[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).
China sells the most US assets in 4 years, dumping $21 billion of US stock and Treasury bonds. Chinese investors sold $21.2 billion in US equities and Treasuries, the US Treasury said Wednesday. Chinese investors sold an all-time record $5.1 billion of US stocks that month.
Federal Borrowing
The federal government borrows money from the public by issuing securities—bills, notes, and bonds—through the Treasury. Treasury securities are attractive to investors because they are: Backed by the full faith and credit of the United States government. Offered in a wide range of maturities.
The federal government collects revenue from a variety of sources, including individual income taxes, payroll taxes, corporate income taxes, and excise taxes. It also collects revenue from services like admission to national parks and customs duties. In -12, the federal government collected $.
