In order to whip up a good bit of Red fear in America, politicians and pundits like to proclaim loudly that China 'owns America'. While China does hold a good portion of US debt, it isn't the Communist behemoth that 'owns America', it's actually still Japan. Writes Daniel Gross in The Daily Beast:
But the global economy is a dynamic place. Things change. And today, it’s highly likely that the biggest foreign holder of U.S. debt isn’t the snarling Asian tiger of China. Rather, it’s the wounded, unthreatening kitty cat of Japan.
That’s right, Japan. Twenty years ago, Japan occupied the place that China now does in our commercial imagination—the aggressive, swashbuckling, mercantilist power from the east that was bent on global economic domination. But the past two decades haven’t been kind to Japan. Hampered by low growth, demographic decline, a constipated political system, a scarcity of energy resources, a massive debt overhang, and a crippling 2011 tsunami, Japan has become the sick man of Asia. The country still remains wealthy, and has a high savings rate. And its central bank and private investors always had a huge portfolio of U.S. government bonds.....
In addition, Japan may have bought U.S. bonds as a way of diversifying away from the troubled euro. And so between September 2011 and September 2012, Japan’s holdings of Treasury securities rose to $1.13 trillion, up $146 billion, or 15 percent.