This study explores how economic policy uncertainty (EPU) affects corporate leverage, with a focus on the role of cash holdings as a mediating variable. Using panel data from 3,947 non-financial firms in China between 2014 and 2023, the analysis applies fixed-effect regressions and Sobel tests to examine this relationship. The results show that higher EPU significantly reduces corporate leverage, and firms with greater cash reserves tend to hold less debt. The Sobel test confirms a partial mediating effect of cash holdings, indicating that liquidity serves as a transmission channel from uncertainty to capital structure adjustments. Further analysis reveals that this effect varies by investment intensity. High-investment firms reduce both cash and leverage under uncertainty, while low-investment firms increase cash reserves before lowering debt. This research offers insights into how firms manage financial risk in uncertain environments and highlights the importance of liquidity management in corporate decision-making. The findings provide useful guidance for financial managers and policymakers concerned with corporate resilience under macroeconomic volatility.