China Remains the Largest Foreign Holder of U.S. Treasuries

According to the latest data released by the US Department of Treasury, China remains the largest foreign investor in US treasury securities. As of September 2009, China holds $798.90B of US treasuries. Japan is the second largest investor at $751.50B followed by the UK at $249.3B.

The top 10 foreign holders of US Treasury securities with year to date changes are shown below:

(amount in billions of US dollar)

S.No.	Country	Jan,2009	Sept,2009	YTD Change %
1	China	739.6	798.9	8.02%
2	Japan	634.8	751.5	14.61%
3	UK	123.9	249.3	50.30%
4	Oil Exporters	186.6	185.3	-0.70%
5	Caribbean Banking Centers	176.6	171.7	-2.85%
6	Brazil	133.5	144.9	7.87%
7	Hong Kong	71.7	132.2	45.76%
8	Russia	119.6	121.8	1.81%
9	Luxembourg	87	98.7	11.85%
10	Taiwan	73.3	78.1	6.15%

Note: Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.

Caribbean Banking Centers include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, British Virgin Islands and Panama.

Source: US Department of Treasury

China has increased its investment in US treasuries by about 8% since the beginning of the year. It is interesting to see that the UK and Hong Kong have increased their investments significantly this year. UK increased its holdings by 50.30% and Hong Kong raised it by nearly 46%. Russian investment in US treasuries is mostly flat this year.

Among the BRIC countries, India has the lowest US treasury holdings at $35.9B. The foreign exchange reserves for BRIC countries as of September this year are:

Brazil = $224 Billion
Russia=$413.45 Billion
China=$2,272 Billion
India = $280.34 Billion

The Ratio of US Treasuries to Foreign Exchange Reserves for each country is as follows:

Brazil = 64.63%
Russia = 29.46%
China = 35.15%
India = 12.81%

From the above, we can infer that Brazil has the highest exposure to US treasuries and India has the lowest exposure at just 12.81%. The vulnerability ratio is high for China also since the ratio stands at 35.15%. With the US dollar on a downward spiral everyday Brazil, China and Russia will be adversely affected more than India. While in one way Russia, Brazil and China’s holdings show their confidence in the US, it may me wise for them to reduce their US treasury holdings now and diversify into other investments.

For the complete listing of Major Foreign Holders of US Treasury Securities as of September, go here.

Comments

[Mad Hedge Fund Trader]

vdw I guess it’s a sign of the times when the comedy show, Saturday Night Live, pokes fun at America’s trade deficit with China. In an imaginary press conference, President Hu Jintao told Obama he was not allowed to pay off the US debt to the Middle Kingdom by giving them the 750,000 clunkers he bought with last summer’s stimulus program. He then asked how many jobs his program has actually created, and Obama had to give the sorry answer that it was none. China’s president then asked how the $1 trillion health care plan for 31 million uninsured Americans was going to cut the deficit, while China’s 1.3 billion went without coverage. I won’t tell you what happened next, except that China’s president asked why he wasn’t being taken out to dinner and a movie first. Where is the Federal Communications Commission when you need them? Have America’s economic policies become the laughing stock of the world? I never thought I’d see the day when out budget and current account deficits became a target for popular culture, but here we are. Better take another look at the TBT.

2009 Nov 23 08:46 AM

[huangthomas]

To be continued.

2009 Nov 23 09:59 AM

[geohjr]

Regarding the treasury purchases, although China is purchasing treasuries, they are swapping out of agencies big time. A good portion of the buys are a net swap; moving up in (relative) quality, not all new (additional) money from an overall investment in US perspective.

I'm with you on TBT, but could be a rough ride.

2009 Nov 23 11:31 AM

[surfgeezer]

C'mon David, are you seriously saying they buy Treasuries for investment purpose's? LOL
It is about the exchange rate and I always wonder if a political agenda isn't working if that is not mentioned?
Brazil raised taxes on incoming money precisely to invest in Treasuries and hedge their risk.
I find it deliciously ironic that the high income people investing in Brazil are putting 1.5 to 2% back into Treasuries.
In fact maybe I'll borrow a ploy from FOX and say my buys in Brazil are really my patriotism at work!

2009 Nov 23 09:11 PM

[Alan Young]

Surfgeezer just beat me to it. Brazil's currency has been rocketing upward, so clearly the USD overweighting in their reserves are meant to reduce the value of the Real, not enhance it. The more I learn about Brazil, the more respect I have for their fiscal management.

Law enforcement, though, still not so good.

2009 Nov 24 09:43 AM