Palau Caught in Geopolitical Crossfire: China's Influence and US Military Expansion

Mon Nov 24 2025 11:02:05 GMT+0200 (Eastern European Standard Time)

In the midst of escalating tensions between China and the US, Palau finds itself at the center of a geopolitical struggle impacting its economy, environment, and stability. This article explores the complex relationship Palau has with Taiwan, the implications of Chinese tourism, and the growing US military presence.

As Palau navigates the escalating tensions between the US and China, its relationship with Taiwan remains pivotal. Recent years have seen a decline in Chinese tourism, allegedly due to political pressure from Beijing. Meanwhile, the US is enhancing military infrastructure on the island to counter Chinese influence, leading to concerns among locals about national security and environmental sustainability.

The air above Palau's pristine waters smells of salt and breadfruit, and on calm mornings in Koror, Palau's commercial centre, the whirr of dive boat engines echoes across the bay.

A few years ago, those boats were filled with tourists – many from China – drawn to Palau's lagoons and limestone caves. Hotels were full, restaurants bustling, and fishermen could barely keep up with demand. But that is no more.

The boom – and the abrupt collapse – was no accident. Between 2015 and 2017, Chinese tourists made up around half of its visitors. Then, in 2017, Beijing reportedly ordered tour operators to stop selling packages to Palau, slashing the main source of tourism to the islands at the time.

Palauan officials allege that China has used its vast tourism market as a political leverage to wean Palau away from recognizing Taiwan and move it into Beijing’s sphere of influence. Palau is one of only a dozen nations that still recognize Taiwan as a sovereign state, challenging a key pillar of China's foreign policy. Palau's location makes it a strategic target for the world's superpowers, sitting on the “Second Island Chain,” crucial for US military strategy to contain China's expansion.

Under the Compact of Free Association, Palau allows the US exclusive military access in exchange for extensive aid. The US has ramped up its military footprint, upgrading facilities, and planning to expand Malakal Harbour to accommodate military vessels.

The competition for allegiance has consequences at the grassroots level. Fearful of becoming collateral damage in an unfolding military conflict, many Palauans express anxiety over the geopolitical chess game being played around them.

Palau's president, Surangel Whipps Jr., reiterated that China's attempts to leverage tourism and investment for political influence are, in his view, harmful to the local economy. He stressed Palau's commitment to maintaining its ties with Taiwan, despite Chinese overtures.

As the diplomatic tussle continues, issues of environmental sustainability and economic stability remain critical for this small island nation, where the echoes of larger conflicts can feel overwhelmingly close.