Since the U.S. dollar has a variable exchange rate, however, any sale by any nation holding huge U.S. debt or dollar reserves will trigger the adjustment of the trade balance at the international level. The offloaded U.S. reserves by China will either end up with another nation or will return back to the U.S.
If the China bloc disposes of net foreign assets amounting to more than 20% of GDP by offloading US bloc bonds over 10 years, the IMF finds that the China bloc's domestic interest rates would fall by four basis points.
If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.
Early in the pandemic, foreign ownership of US debt fell as countries such as Saudi Arabia, China, and Brazil sold their shares of US Treasuries for short-term capital.
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.
Key Takeaways. China invests heavily in U.S. Treasury bonds to keep its export prices lower. China focuses on export-led growth to help generate jobs. To keep its export prices low, China must keep its currency—the renminbi (RMB)—low compared to the U.S. dollar.
So if the U.S. cannot pay its creditors, interest rates on U.S. debt would go up, creating a cascade of higher interest rates. So mortgage rates, credit card rates, car loan rates. All would become more expensive. Finally, there is a real concern about the economy — that a default could spark a recession.
How much does Russia owe? About $40 billion US in foreign bonds, about half of that to foreigners.
1 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.
Because Japan exports so many goods to the U.S. and other nations, the country frequently develops an account surplus in dollars - the currency the U.S. and other countries give Japan in exchange for their products.
Norway is the country with the highest level of household debt based on OECD data followed by Denmark and the Netherlands.
In fact, in 2011, Japan and China agreed to dump the dollar and trade with their respective currencies. China and Russia in recent times have pushed more aggressively to unseat the dollar. Both countries, which are perceived as anti-US, are trading in their local currency with one another.
Who owns China debt? Most of China's local government debt, one of the most regular issuers of domestic debt, is held by state-owned or state-controlled financial institutions. For decades, China's local governments have relied on off balance sheet borrowing through local government financing vehicles (LGFVs).
Therefore, China's national debt has surged almost three times that of the United States in the past 12 months. In the third spot, Japan has a national debt of $13.36 trillion, indicating a drop of $1.49 trillion YoY.
Monthly forex reserves in 84 countries and territories worldwide 2023. Of all the countries in the world, China had, by far, the largest international reserves in 2022, with 3.46 trillion USD in reserves and foreign currency liquidity.
Flashpoints that greatly contributed to the debt over the past 50 years include the wars in Iraq and Afghanistan, the 2008 financial crisis and the 2020 COVID-19 pandemic -- the latter two prompting sweeping stimulus measures from Congress that cost trillions of dollars.
China and Japan are the largest foreign investors in American government debt. Together they own $2 trillion — more than a quarter — of the $7.6 trillion in US Treasury securities held by foreign countries.
What happens if Russia doesn't pay at all? A debt default could drive Russia's few remaining foreign investors out of the country, further isolating it. If the government defaults, companies may follow.
The Russian government owes about $40 billion in debt denominated in U.S. dollars and euros, and half of those bonds are owned by foreign investors. And Russian corporations have racked up approximately $100 billion in foreign currency debt, JPMorgan estimates.
1837: Andrew Jackson
This resulted in a huge government surplus of funds. (In 1835, the $17.9 million budget surplus was greater than the total government expenses for that year.) By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off.
The US doesn't actually have to pay off its $31 trillion mountain of debt, according to top economist Paul Krugman, hitting back at the idea that government finances can be compared to household balance sheets in an op-ed weeks before the US possibly defaults on some obligations.
To pay back one million dollars, at a rate of one dollar per second, would take you 11.5 days. To pay back one billion dollars, at a rate of one dollar per second, would take you 32 years. To pay back one trillion dollars, at a rate of one dollar per second, would take you 31,688 years.