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Robert Farley
By Robert Farley April 22, 2011

Herman Cain says China holds 26 percent of U.S. debt

Here's one thing many Republicans and Democrats agree on: concern about the amount of our debt held by China.

The issue has been raised recently by President Barack Obama and seemingly every Democratic and Republican leader. It's been a key talking point for possible GOP candidate Donald Trump.

So how much of the U.S. debt, exactly, does China hold? In a speech at a tea party event in Iowa on April 16, 2011, potential Republican presidential candidate Herman Cain said it's 26 percent.

"If we don't begin to grow with the potential that we have in this country, we will have another national security crisis, and that national security crisis is that China will be as big as we are," Cain said. "They'll start to develop a military as big and as good as ours and they've got a billion more people and they're holding 26 percent of our debt. And you think we're going to be able to sing Kumbaya with them?"

We e-mailed a spokeswoman at Friends of Herman Cain to substantiate the figure and did not hear back, but it appears Cain was referring to a U.S. Treasury report on the major foreign holders of treasury security. According to the report, as of February of this year, China held $1.15 trillion worth of U.S. treasury securities. Together, all foreign holders came to $4.47 trillion. So China's share of that comes to about 26 percent. China, incidentally, tops the list of foreign holders of U.S. debt, followed by Japan and then, with a much smaller share, countries such as the United Kingdom and Brazil.

But that's just the foreign holders of treasury securities. More than two-thirds of the debt is held by U.S. residents and institutions. When you look at everyone who holds U.S. treasury security, China's share drops to 8.1 percent ($1.15 trillion out of $14 trillion).

Of course, there are lots of ways to slice debt statistics.

For example, instead of gross federal debt (the figure cited above), some people prefer to use a figure for "debt held by the public." That's the gross federal debt minus the share of the debt held by the U.S. government itself. That was $9.4 trillion at the end of 2010. Which would put the portion held by China at about 12.3 percent.

There are also Chinese holdings of debt outside of Treasuries, said Derek Scissors of the conservative Heritage Foundation. But that doesn't get Cain anywhere near his 26 percent figure.

"Even stretching, you can't get past 15.6 percent of our debt as held by China and I would not use that number," Scissors said.

The number cited by Cain is "misleadingly large," Scissors said. "He's not talking about our debt, he's talking about the foreign share of our debt. If you are going to use that number, you really have to explain it."

In other words, Cain should have dropped in some qualifiers to make his statement accurate. For example, he could have said "among the foreign holders of U.S. debt, China ranks first and holds 26 percent." But he didn't. Cain said simply that China "is holding 26 percent of our debt." There are a couple ways to consider debt, but using the two most common, Cain is either off by more than double or more than triple. We rate Cain's statement False.

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Our Sources

Des Moines Register, "Cain recounts journey toward potential race," by Reid Forgrave, April 17, 2011

U.S. Treasury website,  Major Foreign Holders of Treasury securities

U.S. Treasury website, Foreign Holdings of U.S. Long-Term Debt Securities by country as of June 30, 2010

U.S. Government Accountability Office, Federal Debt: Answers to Frequently Asked Questions

U.S. Department of the Treasury's TreasuryDirect, The Debt to the Penny and Who Holds It

Heritage Foundation, "Donald Trump Has A Lot to Learn About China," by Bryan Riley, April 21, 2011

Interview with Derek Scissors, research fellow at the Heritage Foundation, April 21, 2011

E-mail interview with Natalie Wyeth, spokeswoman for the U.S. Treasury, April 22, 2011

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