Leaked diplomatic cables vividly show China’s willingness to translate its massive holdings of US debt into political influence on issues ranging from Taiwan’s sovereignty to Washington’s financial policy.

China’s clout — gleaned from its nearly $900 billion stack of US debt — has been widely commented on in the United States, but sensitive cables show just how much influence Beijing has and how keen Washington is to address its rival’s concerns.

An October 2008 cable, released by WikiLeaks, showed a senior Chinese official linking questions about much-needed Chinese investment to sensitive military sales to Taiwan.

Amid the panic of Lehman Brothers’ collapse and the ensuing liquidity crunch, Liu Jiahua, an official who then helped manage China’s foreign reserves, was ‘non-committal on the possible resumption of lending.’

Instead, ‘Liu — citing an Internet discussion forum — said that as in the United States, the Chinese leadership must pay close attention to public opinion in forming policies,’ according to the memo.

‘In that regard, 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.’

His comments came days after the Pentagon notified Congress it was poised to […]