Tuesday, February 22, 2011

Leaked Cables Show China Used Debt Holdings to Pressure US

File this one under 'obvious'. Of course China is going to try an influence us to do what they want, and of course they will play their strong cards. Economic brinkmanship (collapsing the US debt market, possibly leading to another major global depression [yes, hurting their economy as well]) is among their strongest. This is one of the reasons our debt is more and more being talked about as a national security threat.


"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 sell $6.5 billion worth of arms to China's arch rival Taiwan.

The much-delayed package was eventually sold, but did not include requested F-16 jets.

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