5 Foreign Countries That Own the Most U.S. Debt

The U.S. government incurs debt when it issues Treasury securities to fund the deficit between the amount of money that it receives in taxes and other revenues versus the amount of money that it spends on defense, welfare programs, the interest it pays on its current debt, and more. As of May 25, 2023, the government's total debt is $31.47 trillion. The largest foreign countries that hold U.S. debt are Japan, China, the U.K., Belgium, and Luxembourg.

Types of Debt

U.S. national debt is categorized as intragovernmental debt and public debt. Intragovernmental debt is debt held within the U.S. by federal agencies and entities. It makes up about a fifth of the total outstanding U.S. debt. This debt includes money owed to Social Security, military retirement funds, Medicare, and other retirement funds.

The remainder is public debt. Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and individual investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.

As of May 25, 2023, $24.6 trillion of the national debt is public debt.

1. Japan

Japan held $1.1 trillion in Treasury securities as of Jan. 2023, beating out China as the largest foreign holder of U.S. debt. The low and negative yield market in Japan makes holding U.S. debt attractive. Japan holds 14.86% of foreign-owned U.S. debt.

2. China

China gets a lot of attention for holding a big chunk of the U.S. government's debt. Given that its economy expanded rapidly in the last decades, perhaps this shouldn't come as a surprise. China takes the second spot behind Japan among foreign holders of U.S. debt with $859 billion in Treasury holdings as of Jan. 2023.

While Chinese-owned debt is frequently drummed up as a political talking point, there's nothing particularly sinister about an export-oriented economy investing in Treasury securities. In fact, Treasuries are a logical investment for a country with high foreign currency reserves. China currently holds almost 11.60% of U.S. foreign debt.

3. The United Kingdom

British investors increased their holdings of U.S. debt to $668 billion as of Jan. 2023. This increased from $655 billion the month before. The U.K.'s investment in U.S. debt may be linked to growing economic uncertainty in the U.K. It's still recovering from the effects of the coronavirus pandemic as well as the loss of many trading relationships due to Brexit. The U.K. holds 9.02% of U.S. foreign debt.

4. Belgium

Belgium's large holdings of U.S. Treasuries can partially be attributed to the financial activity of Brussels-based company Euroclear, which is a major European financial house that specializes in the settlement of securities transactions. Euroclear currently holds assets on behalf of more than 2,000 clients.

As of Jan. 2023, Belgium held $331 billion in U.S. debt, which is 4.47% of total foreign debt.

5. Luxembourg

Luxembourg is the fifth-largest holder of U.S. debt among foreign countries while having one of the highest GDP per capita—$133,590 as of 2021, the latest data available. This ranking may be due to Luxembourg's status as a tax haven, where wealthy investors park their funds in local holding companies. Much of this wealth is then invested in various securities, including Treasuries.

As of Jan. 2023, Luxembourg held $318 billion in U.S. Treasuries, equal to 4.29% of total foreign holdings.

The Bottom Line

U.S. Treasury securities are considered to be some of the most liquid and safest assets in the world. For this reason, and because a majority of global trade is conducted in U.S. dollars, many countries hold U.S. debt as an investment.