US think tank has raised concerns that China is using transnational criminal organizations to push its political agenda in Palau, potentially undermining the island nation’s diplomatic ties with Taiwan, according to Taipei Times.
China’s Influence Through Criminal Networks
A report by Pacific Economics suggests that Chinese-backed transnational criminal organizations have been investing in Palau as part of Beijing’s strategic efforts to expand its influence. The report highlights that China is using business, academia, and cultural initiatives alongside criminal syndicates to strengthen its foothold in Palau.
One such crime syndicate identified in the report is the Prince Group, a Chinese-Cambodian conglomerate founded by Chinese businessman Chen Zhi. The group has been linked to money laundering, online scams, and human trafficking, drawing scrutiny from the Chinese government and Radio Free Asia.
The Prince Group has proposed investing over USD 1 billion in resort developments in Palau, adding to a surge of Chinese-linked hotel investments in the island nation.
Threat to Palau’s Sovereignty and Economy
According to Pacific Economics co-founder Jarod Baker, criminal organizations serve as a covert tool for China to infiltrate foreign economies:
“These syndicates are used to covertly bring in money, people, and other elements where China’s foreign ministry efforts might fall short.”
The Island Times, a local Palauan newspaper, cited the report as warning that the infiltration of criminal enterprises could deter legitimate investors, tarnishing Palau’s investment reputation and harming its tourism industry.
Moreover, China-affiliated projects seeking land and infrastructure could undermine Palau’s sovereignty and disrupt its strategic role in the Pacific.
Taiwan’s Response and Palau’s Stance
In response, Taiwan’s Ministry of Foreign Affairs condemned China’s actions, stating that Chinese businesses and criminal organizations have long been infiltrating Palau under the guise of land development and investment. The ministry accused these entities of engaging in money laundering, gambling, and fraud to economically coerce Palau.
Taiwan contrasted its partnership with Palau against China’s activities, emphasizing that Taiwanese investments have promoted economic development in the island nation.
Palauan President Surangel Whipps Jr., who began his second term in January, has been a strong supporter of Taiwan since taking office in 2021. He has repeatedly accused China of pressuring Palau to switch diplomatic allegiance by weaponizing tourism.
Strategic Implications in the Pacific
Palau is one of the few nations that recognize Taiwan diplomatically and does not adhere to China’s “One China” policy. Given its strategic location in the Pacific, China’s growing influence in Palau could have geopolitical consequences, particularly for Taiwan and the US Indo-Pacific strategy.
Pacific Economics has advised Palau to focus on preventing harmful business activities while encouraging positive investments from Taiwan (hotels), Australia (solar projects), and the US (infrastructure development).