China holds about $1.2 trillion in U.S. government debt, according to the Treasury Department's latest figures. That's about 30 percent higher than the previous estimate.
This is part of those global imbalances we keep talking about. China exports more than it imports; the U.S. imports more than it exports. So U.S. dollars keep piling up in China.
China ends up lending a lot of those dollars back to the U.S. This keeps China's currency and exports cheap, and helps the U.S. finance its budget deficit.
These persistent imbalances can contribute to big, Giant Pool of Money-type trouble for the global economy.
On a more immediate note, our huge debt to China can be a bit unsettling. It feels like they own us now, like they have all this power over us.
But if you're China, you're looking at the U.S. and thinking: The U.S. owes us all this money. I hope the U.S. economy stays healthy so they can pay us back (and so they can keep buying our stuff). For China, the U.S. is too big to fail.
And it's not just China. Japan holds nearly $900 billion in U.S. government debt. In all, U.S. debt held abroad totals some $4.4 trillion.
