China's Latest Play: Offering Millions to Palau in Exchange for Friendship

Written By Dr Hugh Tuckfield

China is offering economic incentives to Palau in an attempt to persuade the country to sever ties with Taiwan. This move is part of China's strategy to overcome the U.S.'s efforts to isolate Beijing.

However, the strong friendship between Taiwan and Palau may make China's "money diplomacy" ineffective. Experts suggest that China aims to use Pacific island nations to counter the U.S.'s containment strategy against China, while Taiwan remains committed to supporting Palau.

How significant is the friendship between Taiwan and Palau in the context of China's attempts to influence Palau's diplomatic decisions?

The friendship between Taiwan and Palau holds significant importance in the context of China's attempts to influence Palau's diplomatic decisions. Despite China's economic incentives aimed at persuading Palau to sever ties with Taiwan, the strong relationship between Taiwan and Palau showcases a notable resistance to China's "money diplomacy" strategy.

This resistance is crucial as it highlights the limitations of China's approach to altering diplomatic alliances in the Pacific region, particularly those involving Taiwan. Rosalia Wu, secretary-general of the Democratic Progressive Party's Legislative Yuan Caucus, emphasized that the friendship between Taiwan and Palau remains firm, suggesting that China's economic incentives may not be as persuasive as intended.

Wu's comments underscore the resilience of Taiwan-Palau ties against external pressures and the potential ineffectiveness of China's strategy in this instance. This scenario illustrates the broader geopolitical struggle in the region, where economic incentives are used as tools to sway diplomatic relationships, and the steadfastness of smaller nations like Palau plays a pivotal role in maintaining the status quo.

What specific economic incentives is China offering to Palau in exchange for breaking ties with Taiwan?

China has offered Palau specific economic incentives in exchange for breaking diplomatic ties with Taiwan. These incentives include promises to "fill every hotel room" in Palau's tourism-based private sector, with implications of even more support if more hotels are built. Additionally, China has offered to pay US$20 million a year for a call center in Palau. These offers are part of China's broader strategy to sway countries away from Taiwan by leveraging economic benefits.

How might Palau's decision to maintain ties with Taiwan impact the geopolitical dynamics in the Pacific region, particularly in relation to the U.S.-China rivalry?

Palau's decision to maintain ties with Taiwan could have several implications for the geopolitical dynamics in the Pacific region, especially in the context of the U.S.-China rivalry:

  1. Strategic Positioning: Palau's continued relationship with Taiwan serves as a counter to China's efforts to expand its influence in the Pacific. By resisting China's economic incentives and maintaining its diplomatic ties with Taiwan, Palau indirectly supports the U.S.'s strategic interests in the region. The Pacific islands, including Palau, are crucial for the U.S. to maintain strategic control over the sea and air between Hawaii and Asia, providing a significant advantage in the U.S.-China rivalry.

  2. Signal of Resistance to Economic Coercion: Palau's stance is a clear signal of resistance against China's "money diplomacy" strategy, which aims to lure countries away from Taiwan with economic incentives. This resistance could encourage other nations in the region to reconsider the long-term benefits and potential strings attached to accepting China's offers, thereby impacting China's strategy to isolate Taiwan and expand its influence in the Pacific.

  3. Impact on China's Military Strategy: China's interest in the Pacific island countries is partly driven by its long-term goal to break through the U.S.'s strategic blockade, which includes the first and second island chains. By maintaining ties with Taiwan and, by extension, aligning more closely with U.S. interests, Palau could complicate China's military strategy in the region. This includes China's ability to legally move its fleet to the rear of Guam, which would be a significant strategic advantage for China in any potential conflict scenario with the U.S.

  4. Diplomatic Support for Taiwan: Palau's decision also strengthens Taiwan's international standing, providing it with continued diplomatic support despite China's efforts to isolate it. This support is crucial for Taiwan, as it faces increasing pressure from China. The firm friendship between Palau and Taiwan showcases that China's strategy to poach Taiwan's allies may not always be successful, potentially encouraging other countries to maintain or establish ties with Taiwan.

Palau's decision to maintain ties with Taiwan amidst China's attempts to sway its allegiance has broader implications for the geopolitical dynamics in the Pacific, influencing the U.S.-China rivalry, regional resistance to economic coercion, China's military strategy, and Taiwan's international diplomatic support.

Below is the transcription of part of the letter dated February 15, 2024, that Palau’s President Surangel Whipps Jr. wrote to a United States senator, whose name has been redacted.

“Together, our islands give the U.S. strategic control of the sea and air between Hawaii and Asia larger in area than the 48 contiguous United States – including shipping lanes that the PRC covets – effectively extending the U.S. border for military purposes to Asia. A U.S. military expert testified that it would cost $100 billion to replace this militarily.

In the case of Palau, we also let the U.S. military have land it needs for defense. It has stationed missiles and its earliest warning radars trained on Asia here. The U.S. has no closer relationship with any other nation, which is why a top commander said that Palau is “part of the homeland.” He also said that our islands have “never been more vital strategically.”

The legislation’s Agreement, initiated by President Trump, was to take effect last October 1st . Every day it is not approved plays into the hands of the CCP and the leaders here (some of whom have done ‘business’ with the PRC) who want to accept its seemingly attractive economic offers – at the cost of shifting alliances, beginning with sacrificing Taiwan.

The PRC has already offered to “fill every hotel room” in our tourism-based private sector – “and more if more are built” – and $20 million a year for two acres for a ‘call center.’

The legislation is critical for both of our democracies and a free and open Indo-Pacific.”
—
Dr Hugh Tuckfield

Hugh Tuckfield is a political theorist and human rights lawyer with a career that spans academia, law, and international consultancy. Hugh's academic journey began at Monash University, where he earned degrees in Economics and Law. He further expanded his knowledge with a Master of Human Rights and Democratization (Asia-Pacific Region) from the University of Sydney and the Kathmandu School of Law. His commitment to research led him to complete his doctoral thesis at the University of Sydney in the Department of Government and International Relations. He has held positions as a Visiting Research Fellow at the Refugee Studies Centre at the University of Oxford, a WZB Sydney University Merit Fellow at the WZB Social Science Center in Berlin, and an associate of the Sydney Asia Pacific Migration Center. These roles have allowed him to engage in innovative research and collaboration with fellow scholars. , Hugh has lectured at the University of Sydney and the Kathmandu School of Law on subjects such as international human rights, research methods, and the regional and global governance of migration. His teaching reflects his passion for knowledge-sharing and mentorship.

https://www.linkedin.com/in/hughtuckfield/
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