Foreign Debt and Sovereignty: Why The US Is Not a Debtor Nation to China
Clearing the confusion about foreign holdings of US debt and what monetary sovereignty really means.
The idea that the US is beholden to foreign creditors like China because of its debt holdings is a common misconception that Stephanie Kelton addresses in The Deficit Myth.
Foreign countries hold US Treasury securities as dollar assets acquired by running trade surpluses—exporting more goods and services to the US than they import. They invest these dollars in Treasury bonds as safe, interest-bearing assets.
Because the US issues its own currency and borrows in that currency, it has monetary sovereignty. This means it cannot be forced into default or lose control over its monetary policy due to foreign debt holdings.
Countries without monetary sovereignty—those borrowing in foreign currencies—face different risks, but the US’s position is unique and secure.
Recognizing this helps remove unfounded fears and allows for a clearer understanding of international finance and economic independence.
More on this topic can be found in Foreign Affairs, the London School of Economics, and SuperSummary [[3]](#__3) [[2]](#__2) [[0]](#__0).
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