January 17, 2018

Palau holds out as China squeezes Taiwan’s allies

Palau, a tiny Pacific nation of just 21,500 people, has vowed to resist renewed pressure from Beijing to cut its diplomatic links with Taiwan.

One of just 20 nations keeping formal diplomatic ties with Taiwan, Palau was named in a notice issued by Chinese officials in December warning travel agencies that it was illegal to advertise group tours to destinations not on China’s approved list.

But while a clampdown on Chinese visitors would hurt the Palau economy, the nation said it had no plans to switch its allegiance away from Taipei.

“Palau is a country of laws, it is a democracy and we make our own decisions,” said Olkeriil Kazuo, spokesperson for Palau’s president, Tommy Remengesau.

China is the biggest source of visitors to tourist-dependent Palau, comprising roughly half the 113,000 visitors to the archipelago so far this year, according to the Asian Development Bank.

Tensions between China and Taiwan, a self-governed island that Beijing regards as a renegade province, were heightened last year when the Democratic Progressive party led by Tsai Ing-wen won power, replacing the more China-friendly Nationalist party, or Kuomintang.

The republication of China’s list of approved travel destinations reflects Beijing’s toughening approach towards Taiwan’s allies, experts said.

Kazuo said Beijing’s exclusion of Palau from its list of approved destinations — a measure in place for several years but to date not strictly enforced — has “never affected” the country.

Tourism growth “largely determines economic performance” — the sector accounted for more than half of Palau’s gross domestic product in 2015 — and a “significant” decline in visitors from China, Japan and Taiwan this year has already caused “uncertainty over near-term economic prospects”, according to the ADB.

Dilmei Louisa Olkeriil, Palau’s ambassador to Taiwan, said if the number of Chinese visitors suddenly fell, “of course the [tourism] industry will hurt”.

“If China says, ‘no tourists go to Palau’, then no tourists will come to Palau, we need to be aware of that,” she said, adding that Palau must further diversify its source markets to “protect us from something like this”.

In the decades since China was admitted to the UN in 1971, most countries withdrew recognition of the Republic of China, as Taiwan is formally known, to establish relations with Beijing. In a dogged battle for recognition, both sides have long used promises of financial aid and infrastructure spending to attract allies.

But policymakers in Beijing have now decided that China’s political objectives are not “something they can obtain purely by soft power alone”, said Lauren Dickey, a researcher in cross-Strait relations and a visiting fellow at National Chengchi University in Taipei.

“Even when China has relied on the carrot, the threat of the stick has always been there. The difference is the stick is actually being used this time,” Dickey said.

William Stanton, former head of the American Institute in Taiwan, the unofficial US embassy in Taipei, said it was clear China was “stepping up pressure” against Taiwan.

“It seems to be an important shift,” he said, noting that President Xi Jinping of China had signalled a toughening foreign policy at the Communist party congress in October. “They are a bully and they are going to get worse unless people stand up to them,” said Stanton, who now lectures at National Taiwan University.