China’s ban on its tour groups from visiting the tiny Pacific nation of Palau has taken a toll on the island, with empty hotel rooms, idle tour boats and shuttered travel agencies.
Palau’s offence is its romance with Taiwan, which China regards part of its territory.
The small country has a population of just 21,300 people. It is consists of an archipelago of over 500 islands, part of the Micronesia region in the western Pacific Ocean. Koror Island is home to the former capital, also named Koror, and is the islands’ commercial centre.
Late last year, China effectively banned tour groups to the idyllic tropical archipelago, branding it an illegal destination due to its lack of diplomatic status.
As China extends its influence across the Pacific, Palau is one of Taipei’s 18 remaining allies worldwide and is under pressure to switch allegiances, officials and business people there say.
“There is an ongoing discussion about China weaponizing tourism,” said Jeffrey Barabe, owner of Palau Central Hotel and Palau Carolines Resort in Koror.
“Some believe that the dollars were allowed to flow in and now they are pulling it back to try and get Palau to establish ties diplomatically.”
In the commercial centre of Koror, the Chinese pullback is obvious. Hotel blocks and restaurants stand empty, travel agencies are boarded and boats which take tourists to Palau’s green, mushroom shaped Rock Islands are docked at the piers.
Prior to the ban, Chinese tourists accounted for about half the visitors to Palau. Of the 122,000 visitors in 2017, 55,000 were from China and 9,000 from Taiwan, official data showed.
Chinese investors had also gone on a buying frenzy, building hotels, opening businesses and securing large swathes of prime coastal real estate.
The decline since the ban was announced has been so sharp, charter airline Palau Pacific Airways announced in July it would terminate flights to China, four hours away, from the end of this month.
The Chinese government was “putting an effort to slow or stop tourists going to Palau”, said the Taiwanese-controlled airline, which has experienced a 50 percent fall in bookings since the China restrictions began.
China has previously used its tourism clout as a diplomatic tool, last year halting tours to South Korea after Seoul installed a controversial U.S. missile defense system.
Asked if designating Palau an illegal destination was a way of putting pressure on it to move away from Taiwan, China’s Foreign Ministry said relations with other countries had to happen under the framework of the “one China” principle.