Palau: The Battleground of US and Chinese Geopolitics

Mon Nov 24 2025 16:31:42 GMT+0200 (Eastern European Standard Time)

Explore how Palau, a small Pacific nation, is caught in the geopolitical tug-of-war between the US and China over influence and military strategy, especially concerning Taiwan.

Palau, a tiny nation in the Pacific, finds itself at the center of a geopolitical battle between China and the United States. With a history of tourism ties to China that have waned due to political pressure, and its strategic location in the US military strategy against Chinese expansion, Palau's situation is complicated by its enduring recognition of Taiwan. The nation's leadership is faced with navigating the pressures from both global powers while trying to secure its independence and sustain local economic wellbeing.

The air above Palau's pristine waters smells of salt and breadfruit, and on calm mornings in Koror, Palau's commercial center, 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 had used its vast outbound tourism market as part of a broader campaign to try to peel Palau away from recognizing Taiwan and into Beijing's orbit.

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, the 'one China principle', wherein Beijing asserts sovereignty over Taiwan.

Palau's location on the so-called 'Second Island Chain' makes it a desirable target for influence from the world's biggest powers, particularly the US, which sees it as crucial to containing China's military expansion and responding to potential aggression in the western Pacific.

Under an agreement known as the Compact of Free Association, Palau grants the US exclusive military access in exchange for extensive aid. The US is now strengthening its military footprint in the archipelago, causing a cascading effect on the daily lives of its fewer than 20,000 inhabitants.

As pressures between China and the US escalate, Palauan President Surangel Whipps Jr. has emphasized the precariousness of their situation, stating that no matter what, Palau is going to be at the center of military activity due to its strategic position.

Meanwhile, Taiwan has fostered a close relationship with Palau since it gained independence, offering assistance in various sectors, an effort both local leaders and the Taiwanese ambassador view as solid and enduring. However, the threat of China pulling Palau away looms large, as the Pacific island nation has already seen several of its allies switch allegiance in recent years.

With growing international tensions, Palauans voice their fears about becoming pawns in a wider geopolitical struggle, fearing their island could be caught in the crossfire of a potential US-China conflict.