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Tiny Palau, Population 18,000, Becomes the Stage for a US-China Power Contest

As the Pacific Islands Forum opens on an island with no traffic lights, Beijing's missile test and checkbook diplomacy are testing whether small, market-friendly democracies can hold the line against an authoritarian rival.
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Monday, August 31, 2026

Palau's population was set to swell from 18,000 to 20,000 this week as delegates from dozens of countries arrived for the Pacific Islands Forum Leaders Meeting, an annual summit now overshadowed by a geopolitical contest far larger than the island itself.

Palau's President Surangel Whipps Jr. told reporters Sunday that 'the Pacific is our home, not a theater for geopolitical competition,' urging larger powers not to interfere in talks he hoped would focus on climate change and struggling economies. 'Let's not use this as a place that we should be threatening or making people feel uncomfortable,' he added.

The forum's 18 member countries and territories, many with populations in the low thousands or tens of thousands, sit atop exclusive economic zones rich in fisheries and seabed minerals — assets that have made these remote Pacific waters strategically valuable as China, the United States, Taiwan, Australia and New Zealand compete for influence.

That competition has already fractured the forum's traditional consensus model. According to Oliver Nobetau, Pacific Islands program director at the Lowy Institute, the forum's foreign ministers recently failed to agree on a joint statement condemning Beijing's launch of a ballistic missile into the South Pacific Ocean in July. Most member states opposed China's action, but two refused to endorse a statement saying so — and as a result, none was issued.

'We see examples of this where that consensus-based model, which is referred to as the Pacific Way, can sometimes lead to a bit of paralysis in taking action,' Nobetau said. 'At this point in time when Pacific Islands are facing a lot of acute security issues, decision-making is paramount for this one. We'll be looking to see if President Whipps can sort of steer the forum to take tangible action.'

Separately, the region is contending with volatile weather tied to the latest El Nino cycle, which has brought droughts and floods, threatening food security and clean-water access in island nations that depend heavily on imported goods and foreign aid.

The numbers come first: a nation of 18,000 people, an economic zone spanning vast ocean territory, and a missile launch that split the forum's own foreign ministers down the middle. That split is the story. Beijing's willingness to fire a ballistic missile into shared Pacific waters — and its success in keeping even a critical statement from being issued — shows how far checkbook diplomacy and coercion can go when small democracies lack the leverage to say no.

For Washington, Canberra and Wellington, the stakes are not sentimental. Free, market-oriented governance in the Pacific protects fisheries, seabed resources and shipping lanes that matter to allied economies, including America's. Power leaves a paper trail, and Beijing's missile test is part of that record. The Pacific Islands Forum's paralysis is a warning: when consensus requires unanimity, an authoritarian power needs only a single client state to block accountability. Palau's president wants the Pacific left out of great-power theater. But sovereignty for small nations is best secured not by wishing competition away, but by strengthening ties with partners who respect property rights, open markets and the rule of law over coercion.

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