Meet the Top Ten Creditors to the USA

by: David Hunkar

Recently the Department of the Treasury / Federal Reserve Board updated the Major Foreign Holders of Treasury Securities data. The following are the top ten creditors to the USA as of March, 2009:

S.No. Country Holdings as of March, 2009 (Amt. in Billions)
1 China 767.90
2 Japan 686.70
3 Caribbean Banking Centers 213.60
4 Oil Exporters 192.00
5 Russia 138.40
6 United Kingdom 128.20
7 Brazil 126.60
8 Luxembourg 106.10
9 Hong Kong 78.90
10 Taiwan 74.80

Not surprisingly, China is still the largest holder of U.S. debt. The Chinese hold $767 B as of March this year compared to $727 at the end of 2008. Contrary to media reports that the Chinese are dumping U.S. debt and not buying any new treasury securities, China has not only been holding U.S. debt but increased it slightly in 2009. In March 2008, they held $490B. China accounts for about 1/4th of the total $3.2T debt owed to foreign countries.

Japan is the second largest creditor to U.S. following China with a total of $686B. Japan has always been a buyer of large amount of U.S. debt.

The number three in the list is not a single country. For some unknown reason the Treasury and the Federal Reserve group the Caribbean islands that are basically off-share tax havens into one category. This group includes the Bahamas, Bermuda, Cayman Islands, Netherlands, Antilles, Panama and British Virgin Islands. These islands channel huge amount of wealth into the U.S. due to their tax shelter status. They are ahead of many countries such as the UK, Russia, etc with a total of $213B.

The fourth top creditor is again another group of countries together called the Oil Exporters. This includes Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria. This group holds $192B. Middle east countries like Saudi Arabia, Qatar, Kuwait, UAE, etc. receive huge amounts of U.S. dollars when we purchase their crude oil and then they turn around and reinvest them in the U.S. in the form of treasuries and other vehicles. This process is called the petro-dollar recycling in which the U.S. dollar just gets recycled and returns back to the U.S.

Russia has been a heavy buyer of treasuries since last year. From just $42B in March 2008, Russia currently holds a total of $138B in U.S. debt.

Other notable countries that are big creditors to U.S. include Singapore, Taiwan, Luxembourg and Hong Kong. Malaysia holds the smallest amount of treasuries with just $10B. Canada, a close trading partner of U.S., has bought securities worth $11B only. On a year-over-year basis, the total U.S. debt held by foreign countries has risen from $2.5T last March to $3.2 T this year.

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