China holds $500 billion of US debt. Annual interest is $26 billion. Does China pay US tax on this interest?

Question

If a foreign individual earns interest in US on a treasury, bond, CD etc. than the interest is considered to be US based income and is therefore taxable in US. Do the same taxation rules apply to corporations and governments?

Answer 1

If a sovereign, foreign nation were to file US income tax, they would only have to pay US taxes on income earned while physically present on US soil.  

Somehow I don't think China would fit.

Answer 2

No!