My Red China

It’s almost impossible to mention China in a conversation now without hearing about them owning a large portion of our debt.  Based on my own unscientific and anecdotal perception (I asked a bunch of people), most would answer that China owns “most” or “close to half” of our debt, and I’m commonly asked “when I think that Mao Zedong will be on the hundred dollar bill.”

Before we begin, I’d like to make clear that I am a fiscal conservative.  I believe the US should not routinely run a deficit, particularly a large one.  I live in a state (Florida) with a balanced budget provision in our constitution and even though it’s ignored from time to time, I think it would be a good thing to have nationally, and I believe it to be extremely unwise to routinely run deficit spending.

One of the best resources for understanding the national debt is, unsurprisingly, the US Treasury.  You can read up to date reports on outstanding debt and its holders here.  Wikipedia has a slightly outdated but directionally graphical correct representation of this data here.  From this, we can see that somewhere around 30% of all US Treasuries are held by foreign and international interests.  The rest are held by insurance companies, other investors, pension funds, mutual funds, and the government itself (mostly the Social Security trust fund).

Already, this is probably not the picture you expected.  Less than a third of all US debt held by foreigners.  The treasury helpfully breaks this down further here, listing each country by holdings and the dates of the holdings.  Of that debt, China is indeed the leading holder at roughly 20.8% (as of July 2010), but Japan is right behind at 20.2%, then the United Kingdom at 9.2%, then oil exporters (5.5%), Brazil (4.0%), Hong Kong (3.3%), Russia (3.2%), and Republic of China or Taiwan at 3.2%.

After just a few minutes of basic research, we’ve learned that China has roughly 6% of our national debt under its ownership, and of the rest of the countries on that list, Japan, the UK, Taiwan, and Brazil would be counted in the friendly-to-America column, or at least in the “choose America over China” column.  It can be argued that Hong Kong is essentially China, but it still doesn’t change the general picture at all.

China, along with other countries, just doesn’t own that much of America’s national debt.  In fact, I’d say in light of all the political rhetoric, 6% is a shockingly small amount.

Read more »