China has sought to use its massive U.S. debt holdings to influence American financial policy and deter arms sales to Taiwan, according to diplomatic cables published by Wikileaks.
Fears have circulated for years about China using its debt position to push policy changes. The cables, reported on Monday by AFP, give credence to those concerns.
In one cable sent in October 2008 as the financial panic was at its peak, a senior Chinese official reportedly linked his nation's decision to engage in further lending with America's decision to sell arms to Taiwan, the now-independent nation claimed by China that has enjoyed the protection of the United States for decades.
Liu Jiahua, who helped manage China's foreign reserves, said that "the recent announcement that the United States intends to sell another arms package to Taiwan increases the difficulty the Chinese government faces in explaining any supporting policies to the Chinese public."
According to AFP, these comments came shortly after the Pentagon announced plans to sell $6.5 billion of arms to Taiwan. That package was eventually sold, but not with the requested F-16 jets.
Liu also asked for some guarantee that Chinese investments be protected from loss. He would not commit to a resumption of lending, but he said he would consider a system in which the Federal Reserve or some other agency of the government would guarantee the debt.
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