Top Countries the U.S. Owes Money To

If there’s one thing the good old U.S.A. has a lot of, it’s debt. In an almost embarrassingly short time frame (from the Clinton era until now), the United States has gone from having a budget surplus to being the most indebted nation in the world, racking up an estimated $16 trillion in debt, the burden of which works out to roughly $148,000 per taxpaying citizen. So who do we owe all this money to? Below are the top 10 countries the U.S. owes money to.

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10. Hong Kong (Total U.S. debt owned: $120.0 billion)

 

Although Hong Kong is technically not its own “country”, it is considered to be a “special administrative region” (according to the CIA World Factbook), enjoying its own economic sovereignty independent from mainland China. Hong Kong is also an important Asian banking hub, with a full 20 percent of Hong Kong’s GDP being derived from its massive financial sector. No doubt much of this banking activity includes the purchasing and holding of U.S. Treasuries.

9. Russia (Total U.S. debt owned: $131.6 billion)

 

Although the general sentiment towards America from Russian officials doesn’t seem to be too positive (for example, in 2011 Prime Minister Vladimir Putin called America a “parasite” on the global economy), whatever animosity the Big Bear may have towards the U.S. hasn’t prevented it from buying up several billions of dollars worth of American debt. Even since the time that Putin made the scathing “parasite” comment, Russian officials have been busy adding to their holdings of U.S. Treasuries to the tune of tens of billions of dollars.

8. Luxembourg (Total U.S. debt owned: $146.8 billion)

While Luxembourg is a small country that exists in relative obscurity when it comes to major international affairs, it is no “95-pound weakling” in the area of finance. Boasting a per capita GDP of $80,700 in 2012, Luxembourg is considered to be a major tax haven for high net worth investors. Savvy financial heavyweights from all over the world purchase U.S. debt through Luxembourg-based bank accounts.

7. The United Kingdom (Total U.S. debt owned: $156.9 billion)

One of our most reliable allies throughout the years, the United Kingdom (which includes England, Wales, Scotland, Northern Ireland, the Isle of Man and the Channel Islands) has significantly reduced its holdings of U.S. debt in recent years, falling from its position in the top three to number seven in just two short years. The U.K. definitely has enough debt problems of its own right now, with current public sector debt comprising a heavy 74.5% of GDP.

6. Belgium (Total U.S. debt owned: $167.7 billion)

With a GDP that ranks number 32 in the world (trailing Malaysia and Nigeria), you may wonder why Belgium would even appear in the top ten. The answer can be summed up in two words: tax haven. Belgium is a prominent international banking hub, providing generous tax incentives for foreign companies and wealthy investors. A large portion of U.S. debt held in Belgium is categorized as “custodial”, meaning that it is being held on behalf of investors that reside in neighboring countries such as Germany and France, as well as the more distant nations around the world.

5. Switzerland (Total U.S. debt owned: $178.2 billion)

Switzerland has a storied history of being an international banking powerhouse. Twenty-seven percent of the entire world’s private assets are held by Swiss banks, a staggering figure by any measurement. Switzerland consistently ranks among the top 10 holders of U.S. Treasuries, being an almost iconic offshore tax haven for investors the world over.

4. Taiwan (Total U.S. debt owned: $185.8 billion)

Taiwan is considered to be a part of the People’s Republic of China, but only according to China; Taiwan’s government functions as an independent entity, and it operates with economic sovereignty as well. Taiwan has long been an exporting powerhouse, but when economic downturns occur (as they have in recent years), Taiwanese investors choose to put their money in stable U.S. Treasuries as a hedge against tough times.

3. Brazil (Total U.S. debt owned: $256.4 billion)

Brazil is the world’s sixth largest economy, relying mainly on oil and other raw material exports for its wealth. Aggressive investment from large Chinese entities has fueled much of Brazil’s enviable economic growth over the past decade.

2. Japan (Total U.S. debt owned: $1.14 trillion)

Japan’s current debt-to-GDP ratio is a mind-boggling 219 percent, essentially making it only a hair’s breadth away from becoming a complete economic basket case. With the troubling combination of a declining work force, an aging population and a staggering level of public debt, Japan finds itself in a desperate predicament, which is one of the reasons it has invested so heavily in U.S. Treasuries.

1. China (Total U.S. debt owned: $1.28 trillion)

China takes the number one spot in our top 10 list by a fairly wide margin. This nation boasts a population of over 1.3 billion people, and recently its super-heated economy has been growing faster year-over-year than that of any other industrialized nation in the world. Although many people have speculated that China could do major damage to the U.S. if it chose to greatly dump its U.S. Treasury holdings, the repercussions to China would be the equivalent of shooting itself in the foot, as they finance much of their own economic growth by investing in American debt. China has been making several moves as of late to begin diversifying into raw materials and precious metals, more than likely as a means to offset some of the risk of holding massive amounts of American debt, as the U.S. deficit continues to climb on a second-by-second basis.