Palau, also known as Belau, has faced retaliation from mainland China for its refusal to sever ties with Taiwan. Beijing has restricted Chinese tourists from traveling to Palau, prompting the country to actively seek ways to reduce its dependency on China. These efforts are starting to pay off as more and more airlines are announcing new routes to Palau.
The tourism industry plays a crucial role in Palau’s economy. According to International Monetary Fund (IMF) data, around half of Palau’s GDP comes from tourism. Palau is one of the only three countries in the Pacific region that still maintain diplomatic relations with Taiwan. Despite neighboring countries like the Solomon Islands, Kiribati, and Nauru succumbing to Chinese pressure in the past five years by cutting ties with Taiwan in favor of Beijing, Palau has remained steadfast.
President of Palau, Surangel Whipps Jr., told Nikkei Asia in July that China tends to weaponize its role as a significant source of tourists for Palau. He warned that this situation would escalate during election years.
In November 2017, the Chinese government banned state-owned travel agencies from organizing group tours to Palau, leading to an immediate 22% drop in Chinese tourist numbers by the end of that year.
Nikkei Asia quoted Anna Powles, a senior lecturer at Massey University’s Centre for Defence and Security Studies, saying that this ban was China’s way of pressuring Palau to abandon Taiwan recognition through the tourism industry.
In May this year, a Palau delegation was barred from entering Macau to attend the Asia Global Travel Forum. President Whipps Jr. believed that this ban was orchestrated by the Chinese government.
Earlier this year, Chinese authorities issued travel warnings specifically targeting Palau. The state-owned People’s Daily referred to this as a “natural response” to increasing threats to Chinese tourist safety.
However, Palau’s Minister of Tourism, Ngiraibelas Tmetuchl, dismissed these safety concerns stating there have been no incidents involving Chinese tourists, the Palau government, or its citizens.
President Whipps Jr. emphasized in the July interview with Nikkei Asia the need for Palau to “achieve economic diversification” to reduce reliance on Chinese tourists.
President of Palau revealed that China had offered to “build all the hotels you need and bring in a million tourists” if Palau abandoned its relationship with Taiwan.
This is not the first time the Chinese government has weaponized the tourism industry. In 2017, Beijing prohibited Chinese tour groups from traveling to South Korea in response to Seoul’s plans to deploy a U.S.-backed missile defense system, a move strongly opposed by China.
Minister Tmetuchl has been promoting Palau’s tourism industry worldwide and trying to attract more flights, aiming to lessen reliance on Chinese tourists, who currently make up the largest proportion of foreign visitors. With President Whipps Jr. reelected in the November 5th elections, Tmetuchl’s efforts will gain further momentum.
Despite Chinese tourist numbers plummeting from a peak of 91,000 in 2015 to around 15,000 this year, Tmetuchl expressed satisfaction with this shift. It provides an opportunity to reassess and manage sustainable tourism numbers.
“We need mature tourists, people who respect culture and the environment,” Tmetuchl said. Palau is now diversifying its visitor base, focusing on “high-quality visitors who generate income.” Japan and South Korea are key target markets for Palau, with hopes to increase the number of tourists from both countries, aiding Palau in achieving its goal of hosting 120,000 visitors annually.
Palau’s efforts are bearing fruit. United Airlines, headquartered in the U.S., announced in early October the launch of direct flights between Tokyo, Japan, and Koror, Palau, starting in April next year. Tmetuchl stated that this will “change the game” by not only connecting Palau with Japan but also linking it to European and American markets.
Australian carrier Qantas also announced the Palau Paradise Express, the first direct flight from Australia to Palau, set to commence in November. Nikkei Asia quoted Huiyuan Liu, a researcher at the Development Policy Centre in Canberra, saying that introducing regular flights from Australia will help diversify the tourism market, reducing Palau’s vulnerability to fluctuations in Asian markets.
With the resumption of direct flights from Asian countries, a recent World Bank report forecasts robust economic growth of 11.2% for Palau next year, marking a positive change.
To resist China’s influence, Tmetuchl stated that Palau has been working “very hard to make partners understand that we need to strengthen the economy and build an ‘air bridge’.”
President Whipps Jr. told Bloomberg in October about the increasing pressure from China. China is attempting to coerce Palau to halt its support for Taiwan, especially as the national elections approach.
President Whipps Jr. stressed, “This is a challenge that countries that believe in freedom, democracy, and the rule of law need to face unitedly. Otherwise, we might be engulfed.”