It turns out this isn't really true, though unfortunately this destructive myth continues to dominate political/economic debates.
Yes, China holds a lot, but they're not dominant, and when you add it up, most debt is actually domestically held, just like in Japan.
Total Holdings of US Treasuries: $121.9 billion
Percent of US Debt that they own: 0.9%
Source: US Treasury
Total Holdings of US Treasuries: $148.3 billion
Percent of US Debt that they own: 1%
The Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama, and British Virgin Islands all function as offshore financial centers. Of course, they invest in Treasury Securities as well.
Source: US Treasury
Total Holdings of US Treasuries: $153.4 billion
Percent of US Debt that they own: 1.1%
Source: US Treasury
Total Holdings of Treasuries: $211.4 billion
Percent of US Debt that they own: 1.5%
Source: US Treasury
Total holdings of Treasuries: $229.8 billion
Percent of US Debt that they own: 1.6%
Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
Source: US Treasury
Total Holdings of US Treasuries: $300.5 billion
Percent of US Debt that they own: 2%
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of US Treasuries: $301.8 billion
Percent of US Debt that they own: 2.1%
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of US Treasuries: $320.9 billion
Percent of US Debt that they own: 2.2%
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of US Treasuries: $337.7 billion
Percent of US Debt that they own: 2.4%
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of Treasuries: $346.5 billion
Percent of US Debt that they own: 2.4%
Source: US Treasury
Total Holdings of US Treasuries: $504.7 billion
Percent of US Debt that they own: 3.5%
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of US Treasuries: $506.1 billion
Percent of US Debt that they own: 3.5%
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of Treasuries: $912.4 billion
Percent of US Debt that they own: 6.4%
Source: US Treasury
Total Holdings of US Treasuries: $959.4 billion
Percent of US Debt that they own: 6.6%
The 'Household Sector' does include hedge funds, by the way.
Source: Federal Reserve Flow of Funds Accounts Note: Latest Statistics are as of March 2011
Total Holdings of Treasuries: $1.16 trillion
Percent of US Debt that they own: 8%
Source: US Treasury
The Treasury owes the Fed $1.63 trillion in Treasuries, much of which were bought for the Quantitative Easing programs.
That's 11.3% of US debt, much more than China.
Source: Federal Reserve
But Americans own most of their own country's $14,342,909,569,328.74 of debt.
Social Security Trust Fund
Total Holdings of US Treasuries: $2.67 trillion
Percent of US Debt that they own: 19%
The Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds invest exclusively in special issue bonds that are only available to the Social Security trust fund. These are not publicly traded securities, but they still constitute a huge amount of debt.
Source: Social Security Administration