WASHINGTON -- Despite what you may have heard, China isn’t the country’s biggest creditor. America is.
The bulk of the national debt -- soon to exceed a staggering $17 trillion -- is held by the Federal Reserve, Social Security system, various pension plans for civil service workers and military personnel, U.S. banks, mutual funds, private pension plans, insurance companies and individual domestic investors.
China is responsible for just a shade over 7 percent of that total debt. And while it remains the single largest foreign lender (just ahead of Japan), China’s been slowly trimming its holdings, down from nearly 10 percent a few years ago. Overall, all foreign investors -- including national central banks -- account for roughly one third of the total outstanding federal government debt.
"There’s a huge misconception here. The guy on the street thinks that we’re up to our ears in indebtedness to China. And it is a large absolute amount. But the public holds a lot more," said Nicholas R. Lardy, senior fellow at the Peterson Institute for International Economics.
China holds just $1.22 trillion in U.S. Treasury bonds and bills, or 7.3 percent of the current $16.88 trillion total national debt, according to the Treasury Department’s "Major Foreign Holders of Treasury Securities" for February, the most recent month available.
Social Security holds $2.