Palau: Geopolitical Chessboard Amidst Surf and Sun

Mon Nov 24 2025 14:55:15 GMT+0200 (Eastern European Standard Time)

Explore how the tiny Pacific nation of Palau navigates its role between the competing interests of China, the US, and Taiwan amidst a shifting landscape of tourism and diplomacy.

Palau stands at the crossroads of major geopolitical rivalries, primarily influenced by its connections to Taiwan and the US as well as China's growing interest. Despite its scenic beauty, the implications of these diplomatic relationships are felt in the everyday lives of the Palauan people, shifting from a booming tourism market to pressing concerns over foreign investments and local security.

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.

I actually bought new boats to accommodate the sudden increase of tourists, said a dive shop owner in Koror. But after the tourism peak, he said, these boats had been sitting idle in the bay and it took them years just to make back the money they spent.

The message was clear, Palauan officials allege. They say that China had used its vast outbound tourism market as part of a broader campaign to try to peel Palau away from recognising Taiwan - and into Beijing's orbit.

Palau is one of only a dozen nations that still recognise Taiwan as a sovereign state, which challenges a key pillar of China's foreign policy, the one China principle. Palau's location makes it a desirable target for influence from the world's biggest powers, positioned along the "Second Island Chain" critical for US military strategy.

Historical ties between Palau and the US date back to before its independence in 1994. The Compact of Free Association grants the US exclusive military access in exchange for extensive aid, which is part of the ongoing military buildup in the region.

As tensions rise, both Taiwan and the US are on edge, fearing Palau might shift its allegiance to China. The spy-like investments by Chinese businesses in Palau pose complicated questions over loans and property ownership, raising security concerns in Washington.

Meanwhile, the everyday lives of Palauans are deeply influenced by foreign policies, with many expressing concern over becoming a pawn in the larger geopolitical game between China and the United States. Local leaders describe ongoing efforts to bolster relationships with Taiwan while navigating the pressures from China.

As Palau balances foreign influences and attempts to secure its sovereignty, its residents hope for safety amidst the uncertainties of the shifting global landscape.