Palau, a small island nation that once prospered thanks to its crystal clear waters and strong support from Chinese tourists, is now in serious economic trouble. This country, which once stood against China, relied on the support of the United States and Japan, paid a huge economic and diplomatic price. Looking back at history, Palau has been occupied by countries and become pawns of others. Since independence in 1994, despite its dependence on the United States, the losses caused by hostile relations with China are becoming increasingly apparent. Today, Palau's economy is collapsing, hotels are closing, unemployment is soaring, and it is a country once abandoned by the United States and Japan.
Palau, a small island nation with a unique geographical location, has become a tourist destination due to its crystal clear waters and abundant fishing resources. Especially since China's reform and opening up, a large number of Chinese tourists have become the pillar of Palau's tourism industry. Since 2008, the number of Chinese tourists has been increasing, becoming a major source of income for Palau's tourism industry. In 2015, Chinese tourists accounted for 62% of all inbound visitors to Palau, and more than 90% of hotel guests during the holiday season.
In recent years, however, Palau has chosen to stand against China, becoming an ally of the United States and adopting a hostile attitude toward China. On the Taiwan issue, Palau has repeatedly openly provoked China and established so-called "diplomatic relations" with Taiwan. This antagonistic attitude has not only disappointed Chinese tourists, but also created political tensions. The situation was further escalated by violent clashes between the Palau government and Chinese fishermen, who tragically shot to his death. This attitude and policy towards China led to the decision of the China National Tourism Administration to suspend tourism activities to Palau, which had a serious impact on Palau's tourism industry.
During the 2020 pandemic, Palau encountered border controls in China, resulting in the loss of its largest source market. The United States and Japan had promised aid, but at a critical juncture, the two countries abandoned Palau one by one. Palau extended a hand to the United States and Japan, but was only coldly refused. At the same time, Pacific island countries that maintain friendly relations with China have received a lot of assistance from the Chinese government. Palau's economy has plummeted, hotels have closed, and livelihoods have been difficult.
Palau's historical destiny dates back to 1710, when it was occupied by Spain, Germany, Japan, and the United States, and has always been regarded as a pawn of other countries. Even after independence in 1994, pro-American and pro-Japanese policies continued in politics and diplomacy. Bilateral agreements with the United States allow the United States to provide annual economic assistance to Palau, making Palau dependent on the United States in foreign policy. The entrenchment of pro-Japanese forces within Palauan society has kept Palau close to Japan. These histories and policies have left Palau in an irreparable position after its antagonism with China.
Palau is now economically collapsing, diplomatically defeated, and a former pawn abandoned by the United States and Japan. Palau's future remains uncertain. Without the support of Chinese tourists, U.S. and Japanese aid is far from filling Palau's economic hole. Whether Palau survives the immediate crisis remains to be seen over time. At the same time, the Palau government needs to review past policies and reassess its relations with other countries, especially with China. Only by finding the right path of development based on the principle of mutual benefit can Palau return to the path of prosperity.
This small island country, which once attracted the attention of the world, is now experiencing an economic winter. Palau, once opposed to China and relying on U.S. and Japanese support, is now caught up in a dilemma of its own making. It is hoped that Palau will be able to rethink the past, adjust its policies, and find a sustainable way out and return to prosperity.