China has forced a Pacific airline to close down because of diplomatic ties with Taiwan
- An airline says a Chinese ban on tour groups visiting the Pacific nation of Palau has forced it to end its services "indefinitely."
- Palau Pacific Airlines said sales plummeted since China began fining tour companies for planning trips to Taiwan allies Palau and the Vatican last year.
- Beijing has been accused of "dollar diplomacy" in the past, luring Taiwan's allies away with promises of aid and investment, but now appears to be withholding crucial tourism dollars as a new attempt at influence.
- Airlines have become a pawn in diplomatic rows this year as China successfully threatened foreign carriers to adhere to its political stance on Taiwan.
An airline based in the Pacific nation of Palau says it has been forced to close because of China's attempts to punish the nation for its diplomatic ties with Taiwan.
Beijing considers self-ruled Taiwan to be a province of China and has taken large strides to have the international community adhere to this position while also systematically peeling off Taiwan's allies, leaving the island with just 18 countries as diplomatic partners. One of those is Palau, an archipelago with a population of just 21,000 people.
In a statement to Palau's congress, the company that operates Palau Pacific Airlines, Sea Passion Group, said it is stopping its services "indefinitely" because of actions by China, according to local newspaper Island Times.
The airline spoke of market forces driving down its round-trip prices from Hong Kong to Palau from $800 to $300, and halving of its number of annual passengers, in just five years. But it also pointed to a November decision by China to ban all group tours to Palau and the Vatican - both of which have diplomatic relations with Taiwan - and implement fines on tour agencies up to $45,000.
"The Chinese government made Palau an illegal tour destination possibly and most likely due to lack of diplomatic status," Sea Passion Group said.
The company also said that the use of the word "Palau" was banned in sales materials in October before it became illegal to sell tour packages to the country the next month.
Sea Passion Group, which also operates a hotel and said it spent more than $1 million a year promoting its services, said it did not have a single Chinese booking for July or August this year.
Reverse dollar diplomacy
When the Dominican Republic cut ties with Taiwan in favor of China in May this year, Taiwan's foreign ministry lashed out at Beijing's "dollar diplomacy."
"We strongly condemn China's objectionable decision to use dollar diplomacy to convert Taiwan's diplomatic allies," the statement read. "Developing nations should be aware of the danger of falling into a debt trap when engaging with China."
Taiwan accused China of luring its allies with what the island calls "false promises of investment and aid," citing more than $1 billion worth of promised Chinese assistance for former allies Costa Rica and Sao Tome and Principe that has yet to materialize.
It appears that China is now using a reverse financial method - withholding crucial tourism dollars from small and developing countries via bans on Chinese tour groups - to cause strain between Taiwan and its allies.
Chinese tourists made 131 million overseas trips in 2017 and, by 2021, are expected to spend $429 billion abroad annually.
The skies are the new diplomatic battlefield
While the shuttering of Palau Pacific Airlines is likely a happy side effect in Beijing's eyes, China has used airlines to shape international policy this year.
Earlier this year Beijing began demanding airlines stop listing Taiwan as a country, and instead describe it as a province of China. The incident involved letters sent to 44 foreign airlines. Governments got involved, and the White House even released a statement slamming the demand as "Orwellian nonsense."
But despite political rhetoric to maintain the status quo, US airlines are almost the only large carriers to not have submitted to Beijing's demands.
As previously reported by Business Insider, the airlines were threatened with marks against their credit score if they did not comply, according to research from the Australian Strategic Policy Institute (ASPI).
"Social credit was used specifically in these cases to compel international airlines to acknowledge and adopt the Chinese Communist Party's version of the truth, and so repress alternative perspectives on Taiwan," ASPI researcher Samantha Hoffman wrote.