I 

112TH CONGRESS 

1ST SESSION H. R. 2166 

To increase transparency regarding debt instruments of the United States 

held by foreign governments, to assess the risks to the United States 

of such holdings, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 14, 2011 

Mr. SAM JOHNSON of Texas introduced the following bill; which was referred 

to the Committee on Ways and Means 

A BILL 

To increase transparency regarding debt instruments of the 

United States held by foreign governments, to assess 

the risks to the United States of such holdings, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Foreign-Held Debt 

5 Transparency and Threat Assessment Act’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act: 


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1 (1) APPROPRIATE CONGRESSIONAL COMMIT2 TEES.—The term ‘‘appropriate congressional com3 mittees’’ means the following: 

4 (A) The Committee on Armed Services, the 

5 Committee on Foreign Relations, the Com6 mittee on Finance, and the Committee on the 

7 Budget of the Senate. 

8 (B) The Committee on Armed Services, 

9 the Committee on Foreign Affairs, the Com10 mittee on Ways and Means, and the Committee 

11 on the Budget of the House of Representatives. 

12 (2) DEBT INSTRUMENTS OF THE UNITED

13 STATES.—The term ‘‘debt instruments of the United 

14 States’’ means all bills, notes, and bonds issued or 

15 guaranteed by the United States or by an entity of 

16 the United States Government, including any Gov17 ernment-sponsored enterprise. 

18 SEC. 3. FINDINGS. 

19 Congress makes the following findings: 

20 (1) On March 16, 2006, the United States Sen21 ate debated and then narrowly passed legislation, H. 

22 J. Res. 47, to increase the statutory limit on the 

23 public debt of the United States. In a statement 

24 published in the Congressional Record, then-Senator 

25 Barack Obama opposed the legislation and stated, 


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1 ‘‘The fact that we are here today to debate raising 

2 America’s debt limit is a sign of leadership failure. 

3 It is a sign that the U.S. Government can’t pay its 

4 own bills. It is a sign that we now depend on ongo5 ing financial assistance from foreign countries to fi6 nance our Government’s reckless fiscal policies.’’. 

7 Then-Senator Obama went on to say that ‘‘Increas8 ing America’s debt weakens us domestically and 

9 internationally. Leadership means that ‘the buck 

10 stops here’. Instead, Washington is shifting the bur11 den of bad choices today onto the backs of our chil12 dren and grandchildren. America has a debt problem 

13 and a failure of leadership. Americans deserve bet14 ter.’’. 

15 (2) On February 25, 2010, United States Sec16 retary of State, Hillary Rodham Clinton, urged 

17 members of Congress to address the Federal budget 

18 deficit: ‘‘We have to address this deficit and the debt 

19 of the United States as a matter of national secu20 rity, not only as a matter of economics. I do not like 

21 to be in a position where the United States is a 

22 debtor nation to the extent that we are.’’. The Sec23 retary went on to say that reliance on foreign credi24 tors has hit the United States ‘‘ability to protect our 


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1 security, to manage difficult problems and to show 

2 the leadership that we deserve.’’. 

3 (3) On February 16, 2011, Admiral Mike 

4 Mullen, Chairman of the Joint Chiefs of Staff, testi5 fied before the Committee on Armed Services of the 

6 Senate: ‘‘Indeed, I believe that our debt is the great7 est threat to our national security. If we as a coun8 try do not address our fiscal imbalances in the near9 term, our national power will erode, and the costs to 

10 our ability to maintain and sustain influence could 

11 be great.’’. 

12 (4) The Department of the Treasury borrows 

13 from the private economy by selling securities, in14 cluding Treasury bills, notes, and bonds, in order to 

15 finance the Federal budget deficit. This additional 

16 borrowing to finance the deficit adds to the Federal 

17 debt. 

18 (5) The Federal debt stands at more than 

19 $14,345,000,000,000. 

20 (6) According to a report issued by the Depart21 ment of the Treasury on May 16, 2011, entitled 

22 ‘‘Major Foreign Holders of Treasury Securities’’, 

23 foreign holdings of United States Treasury securities 

24 stood at more than $3,175,000,000,000 at the end 

25 of March 2011. The People’s Republic of China was 


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1 the single largest holder with holdings of more than 

2 $1,144,000,000,000. 

3 (7) Despite efforts by the Department of the 

4 Treasury to identify the nationality of the ultimate 

5 holders of United States securities, including United 

6 States Treasury securities, data pertaining to for7 eign holders of these securities may still fail to re8 flect the true nationality of the foreign entities in9 volved. For example, another Department of the 

10 Treasury report, issued on February 28, 2011, enti11 tled ‘‘Preliminary Report on Foreign Holdings of 

12 U.S. Securities At End-June 2010’’, assigns 

13 $732,000,000,000 worth of United States securities 

14 to the Cayman Islands, a British overseas territory 

15 with a population of only 55,000 people. The Cay16 man Islands is not itself a large investor in United 

17 States securities; rather, it is a major international 

18 financial center and is routinely used as a place to 

19 invest funds from elsewhere. 

20 (8) On February 25, 2010, Simon Johnson, an 

21 economics professor at the Massachusetts Institute 

22 of Technology and a former chief economist for the 

23 International Monetary Fund, testified before the 

24 U.S.-China Economic and Security Review Commis25 sion that United States Treasury data understate 


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1 Chinese holdings of United States Government debt 

2 and ‘‘do not reveal the ultimate country of owner3 ship when debt instruments are held through an 

4 intermediary in another jurisdiction.’’. He stated 

5 that ‘‘a great deal’’ of the United Kingdom’s in6 crease in United States Treasury securities last year 

7 ‘‘may be due to China placing offshore dollars in 

8 London-based banks’’, which are then used to pur9 chase United States Treasury securities. 

10 (9) On February 25, 2010, Dr. Eswar Prasad, 

11 an economist at Cornell University, testified before 

12 the U.S.-China Economic and Security Review Com13 mission that the amount of United States debt held 

14 by the People’s Republic of China is much higher 

15 than United States Treasury data indicate. In his 

16 revised testimony, Dr. Prasad went on to explain 

17 that China is probably currently holding more than 

18 $1,300,000,000,000 in United States Treasury secu19 rities. 

20 (10) According to a February 3, 2009, report 

21 by the Heritage Foundation, entitled ‘‘Chinese For22 eign Investment: Insist on Transparency’’, the State 

23 Administration of Foreign Exchange (SAFE) of the 

24 People’s Republic of China, the government body 

25 that purchases foreign securities, is the single largVerDate Mar 15 2010 04:50 Jun 15, 2011 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2166.IH H2166

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1 est global investor and the largest foreign investor in 

2 the United States. 

3 (11) According to a September 2008 Council on 

4 Foreign Relations report entitled ‘‘Sovereign Wealth 

5 and Sovereign Power,’’ ‘‘. . . political might is often 

6 linked to financial might, and a debtor’s capacity to 

7 project military power hinges on the support of its 

8 creditors . . . The United States’ main sources of fi9 nancing are not allies.’’. The report goes on to argue 

10 that, ‘‘the United States’ current reliance on other 

11 governments for financing represents an underappre12 ciated strategic vulnerability.’’. 

13 (12) In recent years, Chinese military officials 

14 have publicized the potential use of United States 

15 Treasury securities as a means of influencing United 

16 States policy and deterring specific United States 

17 actions. On February 8, 2010, retired People’s Lib18 eration Army (PLA) Major General Luo Yuan, from 

19 the PLA Academy of Military Science, stated in an 

20 interview with state-controlled media that China 

21 could attack the United States ‘‘by oblique means 

22 and stealthy feints’’, in retaliation for United States 

23 arms sales to Taiwan. He went on to say, ‘‘Our re24 taliation should not be restricted to merely military 

25 matters, and we should adopt a strategic package of 


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1 counterpunches covering politics, military affairs, di2 plomacy and economics to treat both the symptoms 

3 and root cause of this disease. For example, we 

4 could sanction them using economic means, such as 

5 dumping some U.S. government bonds.’’. 

6 (13) The PLA has also referenced the concept 

7 of nonmilitary aspects of deterrence in written state8 ments. A PLA textbook, ‘‘The Science of Military 

9 Strategy’’, observes that there are various forms of 

10 deterrence, including economic and technological, all 

11 of which need to be developed and consciously 

12 strengthened in order to maximize effect. These 

13 forms will only work ‘‘with the determination and 

14 volition of employment of the force, and by dangling 

15 the word of deterrence over the rival’s head in case 

16 of necessity.’’. 

17 (14) According to a May 16, 2011, report by 

18 ABC News, a congressional delegation of 10 United 

19 States Senators visited China in April 2011, and 

20 met with Chinese government officials. The news re21 port indicates that, during one meeting, the Sen22 ators were reprimanded by a Chinese official regard23 ing the mounting United States Federal debt. 

24 (15) A February 7, 2010, report by Defense 

25 News suggests that China’s extensive holdings of 


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1 United States Government securities have already 

2 directly influenced United States national security 

3 policy. According to an unnamed Pentagon official, 

4 Obama Administration officials softened a draft of a 

5 key national security document in order to avoid 

6 ‘‘harsh words’’ that ‘‘might upset Chinese officials at 

7 a time when the United States and China are eco8 nomically intertwined.’’. The news report indicates 

9 that these officials ‘‘deleted several passages and 

10 softened others about China’s military buildup’’. 

11 This critical document, the 2010 Quadrennial De12 fense Review, provides an assessment of long-term 

13 threats and challenges for the Nation and is in14 tended to guide military programs, plans, and budg15 ets in the coming decades. 

16 (16) The United States Government pays China 

17 a substantial amount of interest on China’s 

18 $1,144,000,000,000 in holdings of United States 

19 Government debt, and this enhances China’s ability 

20 to fund its own military programs. 

21 (17) According to a March 4, 2011, report by 

22 Xinhua, the official press agency of the government 

23 of the People’s Republic of China, China plans to in24 crease its 2011 military budget by 12.7 percent to 

25 601,000,000,000 yuan (the equivalent of 


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1 $91,500,000,000). This increase is in addition to 

2 China’s 2010 increase in its military budget of 7.5 

3 percent. 

4 (18) According to the Department of Defense’s 

5 (DoD) 2010 report entitled ‘‘Military and Security 

6 Developments Involving the People’s Republic of 

7 China,’’ the DoD estimates China’s actual total mili8 tary-related spending for 2009 to be over 

9 $150,000,000,000. 

10 SEC. 4. SENSE OF CONGRESS. 

11 It is the sense of Congress that— 

12 (1) the growing Federal debt of the United 

13 States has the potential to jeopardize the national 

14 security and economic stability of the United States; 

15 (2) the increasing dependence of the United 

16 States on foreign creditors has the potential to make 

17 the United States vulnerable to undue influence by 

18 certain foreign creditors in national security and 

19 economic policymaking; 

20 (3) the People’s Republic of China is the largest 

21 foreign creditor of the United States, in terms of its 

22 overall holdings of debt instruments of the United 

23 States; 

24 (4) the current level of transparency in the 

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1 ments of the United States is inadequate and needs 

2 to be improved, particularly regarding the holdings 

3 of the People’s Republic of China; 

4 (5) through the People’s Republic of China’s 

5 large holdings of debt instruments of the United 

6 States, China has become a super creditor of the 

7 United States; 

8 (6) under certain circumstances, the holdings of 

9 the People’s Republic of China could give China a 

10 tool with which China can try to manipulate the do11 mestic and foreign policymaking of the United 

12 States, including the United States relationship with 

13 Taiwan; 

14 (7) under certain circumstances, if the People’s 

15 Republic of China were to be displeased with a given 

16 United States policy or action, China could attempt 

17 to destabilize the United States economy by rapidly 

18 divesting large portions of China’s holdings of debt 

19 instruments of the United States; and 

20 (8) the People’s Republic of China’s expansive 

21 holdings of such debt instruments of the United 

22 States could potentially pose a direct threat to the 

23 United States economy and to United States na24 tional security. This potential threat is a significant 

25 issue that warrants further analysis and evaluation. 


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1 SEC. 5. QUARTERLY REPORT ON RISKS POSED BY FOREIGN 

2 HOLDINGS OF DEBT INSTRUMENTS OF THE 

3 UNITED STATES. 

4 (a) QUARTERLY REPORT.—Not later than March 31, 

5 June 30, September 30, and December 31 of each year, 

6 the President shall submit to the appropriate congres7 sional committees a report on the risks posed by foreign 

8 holdings of debt instruments of the United States, in both 

9 classified and unclassified form. 

10 (b) MATTERS TO BE INCLUDED.—Each report sub11 mitted under this section shall include the following: 

12 (1) The most recent data available on foreign 

13 holdings of debt instruments of the United States, 

14 which data shall not be older than the date that is 

15 7 months preceding the date of the report. 

16 (2) The country of domicile of all foreign credi17 tors who hold debt instruments of the United States. 

18 (3) The total amount of debt instruments of the 

19 United States that are held by the foreign creditors, 

20 broken out by the creditors’ country of domicile and 

21 by public, quasi-public, and private creditors. 

22 (4) For each foreign country listed in para23 graph (2)— 

24 (A) an analysis of the country’s purpose in 

25 holding debt instruments of the United States 


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1 and long-term intentions with regard to such 

2 debt instruments; 

3 (B) an analysis of the current and foresee4 able risks to the long-term national security and 

5 economic stability of the United States posed by 

6 each country’s holdings of debt instruments of 

7 the United States; and 

8 (C) a specific determination of whether the 

9 level of risk identified under subparagraph (B) 

10 is acceptable or unacceptable. 

11 (c) PUBLIC AVAILABILITY.—The President shall 

12 make each report required by subsection (a) available, in 

13 its unclassified form, to the public by posting it on the 

14 Internet in a conspicuous manner and location. 

15 SEC. 6. ANNUAL REPORT ON RISKS POSED BY THE FED16 ERAL DEBT OF THE UNITED STATES. 

17 (a) IN GENERAL.—Not later than December 31 of 

18 each year, the Comptroller General of the United States 

19 shall submit to the appropriate congressional committees 

20 a report on the risks to the United States posed by the 

21 Federal debt of the United States. 

22 (b) CONTENT OF REPORT.—Each report submitted 

23 under this section shall include the following: 

24 (1) An analysis of the current and foreseeable 

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1 nomic stability of the United States posed by the 

2 Federal debt of the United States. 

3 (2) A specific determination of whether the lev4 els of risk identified under paragraph (1) are sus5 tainable. 

6 (3) If the determination under paragraph (2) is 

7 that the levels of risk are unsustainable, specific rec8 ommendations for reducing the levels of risk to sus9 tainable levels, in a manner that results in a reduc10 tion in Federal spending. 

11 SEC. 7. CORRECTIVE ACTION TO ADDRESS UNACCEPTABLE 

12 AND UNSUSTAINABLE RISKS TO UNITED 

13 STATES NATIONAL SECURITY AND ECONOMIC 

14 STABILITY. 

15 In any case in which the President determines under 

16 section 5(b)(4)(C) that a foreign country’s holdings of 

17 debt instruments of the United States pose an unaccept18 able risk to the long-term national security or economic 

19 stability of the United States, the President shall, within 

20 30 days of the determination— 

21 (1) formulate a plan of action to reduce the risk 

22 level to an acceptable and sustainable level, in a 

23 manner that results in a reduction in Federal spend24 ing; 


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1 (2) submit to the appropriate congressional 

2 committees a report on the plan of action that in3 cludes a timeline for the implementation of the plan 

4 and recommendations for any legislative action that 

5 would be required to fully implement the plan; and 

6 (3) move expeditiously to implement the plan in 

7 order to protect the long-term national security and 

8 economic stability of the United States. 

Æ 


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