CLOSED restaurants. Empty hotel rooms. Idle tour buses. This is what happened when one nation upset China. Could a similar fate befall Australia?
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| A woman dives off the famous Rock Islands Arch, Palau — Micronesia. |
IT’S just a tiny cluster of islands in the western Pacific. But Palau has become the epicentre of a growing international storm between China and Taiwan.
It could be a sign of things to come.
In recent years, Beijing has lavished the tropical island paradise with financial aid, investment and state-backed tourism campaigns.
That’s all ended.
Palau, despite its tiny size, has stood up to the Chinese behemoth.
It refused to bow to pressure to end its diplomatic ties with Taiwan.
For decades Beijing has been spearheading all its international activities behind its ‘One China’ demand. Taiwan is China, Beijing insists — so other nations should not recognise their independence.
The most recent consequence of much of the West’s acceptance of this policy was the capitulation by many of the world’s airlines to Beijing’s demand that they stop referring to Taiwan as Taiwan on their flight and destination schedules.
It’s China. Even though it’s not.
Unlike Qantas and Australia, Palau stood firm.
Taiwan is an independent democratic state, it says. And Palau’s proud to share those ideals.
Now Beijing is making Palau pay the price.
HEART OF THE MATTER
Communist China insists the island of Taiwan falls under its governance. That’s it. No discussion. It’s an ‘iron-clad’ certainty.
“The One China principle is the precondition and political foundation for China to maintain and develop friendly cooperative relations with all countries around the world,” China’s Foreign Ministry says.
Taiwan feels differently.
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| A Chinese tourist walking on a beach on the Rock Islands in Palau. Visitors to the tiny Pacific nation of Palau were made to sign a promise to respect the environment. |
The former Japanese protectorate was occupied by China at the end of World War II. Then the defeated Republic of China’s government, among many others, fled there when defeated by the Communist uprising on the mainland in 1949.
Ever since, it’s been a tenuous democratic state.
“While Taiwan faces serious diplomatic challenges, the government will not bow down to pressure from Beijing,” its Ministry of Foreign Affairs says.
“The Taiwan issue is a peculiar one, in that countries are now expected to make a binary choice,” says Australian National University Department of Pacific Affairs research fellow Dr Graeme Smith.
“While the ‘diplomatic truce’ with Taiwan’s Kuomintang party lasted (until the Democratic Progressive Party won the 2016 election), Pacific nations felt no pressure to switch, the only thing they missed out on was PRC aid.”
Enter Palau.
It’s a country of 340 islands and attols bounded by the Philippines and Indonesia.
It’s also part of what China deems to be the ‘Second Island Chain’, a rough radius of islands including Japan and the US protectorate of Guam. It says these fall within its ‘sphere of influence’.
China has already seized control of much of its ‘first island chain’ — the disputed coral reefs and rocky outcrops of the South and East China Seas.
In recent years Palau had been the target of a Beijing charm offensive: sold to the Chinese people as an idyllic island holiday paradise — with the nessecary investment in infrastructure to support it.
But no more.
PALAU WON’T BE PUSHED
Palau’s commercial hub of Krodor is all but abandoned. Travel agencies and tour operators have boarded up their windows. Restaurants and hotels stand empty. Boats and buses sit idle.
Palau’s President Tommy Remengesau Jr says it’s all because he refused to cede to pressure from Beijing to drop diplomatic relations with Taiwan. Instead, he chose to recognise Taipei’s independence.
“It is not a secret that China would like us and the diplomatic friends of Taiwan to switch to them, but for Palau it is not our choosing to decide the One China policy,” he said in an interview with Reuters.
While Palau had welcomed Beijing’s investment and tourism, he said his nation’s democratic ideals were a closer fit with Taiwan. And he wasn’t prepared to compromise those ideals in exchange for cash.
Not all agree. Palau’s former president Johnson Toribiong says economics should trump political consequences.
And consequences there are.
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| El Salvador's Foreign Minister Carlos Castaneda, left, stands next to China's Foreign Minister after the Central American nation ditched diplomatic ties with Taiwan in yet another victory for Beijing in its campaign to isolate the island. |
Just last year, 122,000 visitors brought much needed cash into the remote islands.
Some 55,000 were from China.
Beijing went on a buying spree: it bought up prime coastal land. It built hotels. It co-ordinated tourism groups. It also organised aid packages.
Now, Beijing has branded Palau an ‘illegal destination’.
The number of Chinese tourists flying in has collapsed. Chinese investment projects sit idle.
“The implied trade-off of the pain caused to China’s investors in Palau’s tourism sector is that there will be greater opportunities for them down the line, presumably when the next Palau administration comes in,” Dr Smith says.
It’s not the first time China has ‘weaponised’ tourism.
It also banned its citizens from visiting South Korea last year after the US stationed an anti-ballistic missile defence system there in the face of North Korea’s growing aggression.
INCREASING INTRANSIGENCE
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| Chinese tourists Flower Cai, 26, and Iris Shi, 22, from Zheng Zhou enjoying the tropical winter on Green Island, off Cairns, on the Great Barrier Reef. |
China won’t budge on the issue of Taiwan.
Nor will it do so over its illegal island fortresses that have cemented its assertions of control over the ‘First Island Chain’ in the South and East China seas.
Is the ‘Second Island Chain’ next?
The Federated States of Micronesia, the Marshall Islands and Palau are currently supported by funding agreements with the United States. It’s a legacy from World War Two.
These agreements expire between 2023 and 24.
The US appears reluctant to renew its financial support.
China sees an opportunity.
It is already one of the most prominent economic influences in Micronesia and Pacific. It has been showering small nations such as Papua New Guinea, Tonga, Vanuatu and the Solomon Islands with cut-price loans for infrastructure projects.
In return it wants to gain access to their natural resources, to establish support infrastructure for its navy — and to ‘box-in’ Taiwan. It wants to isolate Taiwan from international support.
But, under President Trump, that support has been growing.
“The Trump administration is now taking the initiative and does not dare to break its promise of a One-China policy,” wrote deputy director of Institute of Taiwan Studies of the Chinese Academy of Social Sciences, Wang Shushen.
“Yet in face of the enhancing military relations between the US and Taiwan, Beijing should be vigilant and warn them against brinkmanship.
If the US and Taiwan insist on playing with fire, let them burn their hands.”
AUSTRALIA ON THE EDGE
Last year, Australia’s exports to China were valued at around $110 billion. Chinese investors spend $15 billion on Australian property. Some 1.36 million Chinese tourists visited.
Australia has a lot to lose if it openly disagrees with Beijing.
Is this a factor when it comes to Australia’s diplomatic, political and corporate relationships with China?
“I don’t think it’s any secret that all three are worried about the prospect of economic coercion, particularly in the higher education sector,” Dr Smith says.
“Australia is a lot more central to Beijing’s interests than Palau, and it is sure to face more concerted influence operations (both benign and less so) and economic coercion than the Pacific states.”
And Beijing has made it clear Australia has begun to tread on its toes.
The Commonwealth Government has woken up to the fact that China is stepping into a Pacific power vacuum created by falling international aid packages and cooperative projects.
It’s suddenly eager to participate again.
“We spend billions of dollars a year on foreign aid and this is a very practical way of investing in the future economic growth of our neighbours in the Pacific,” Prime Minister Malcolm Turnbull said at the announcement of a $137 million dollar undersea internet cable project between Papua New Guinea and the Solomon Islands. Two-thirds of the cost is being carried by Australia.
Australia has warned Pacific nations such as Palau and Vanuatu that China’s enticing loans could present a debt trap.
“We want to ensure that they retain their sovereignty, that they have sustainable economies and that they are not trapped into unsustainable debt outcomes,” Foreign Minister Julie Bishop recently said. “The trap can then be a debt-for-equity swap and they have lost their sovereignty.”
Beijing immediately bit back, accusing Australia of “wrong remarks”.
Chinese State Councillor Wang Yi said Australia must do more to boost mutual trust rather than being “groundlessly suspicious”.
Put on top of the Turnbull Government’s recent moves to clampdown on foreign interferences (spurred after widespread reports of Chinese manipulation of local politics), Beijing’s state-run news service The Global Times described its relationship with Australia as “among the worst of all Western nations”.
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