China is using transnational criminal organizations to advance its political agenda in Palau, posing a serious threat to the Western Pacific nation’s economic stability, security and diplomatic relations, a U.S. think tank warned.
These organizations have penetrated Palau’s tourism and real estate sectors through investment schemes and engaged in illicit gambling, money laundering and financial fraud, according to a report published on March 1 by Pacific Economics.
Among the key players is the Prince Holding Group, one of the largest conglomerates in Cambodia. Founded by Chinese businessman Neak Oknha Chen Zhi, the group has been expanding luxury resort and real estate projects in Palau, and has been accused of using shell companies for money laundering.
Radio Free Asia’s (RFA) previous investigation found that the group was involved in criminal activities such as money laundering, online gambling, human trafficking and online fraud.
Palau’s financial system has also been affected by Chinese nationals. Wang Shuiming, a key suspect in Singapore’s largest money-laundering case, is allegedly expanding illegal online gambling operations into Palau. Fang Xiaojie, a known fraudulent banking operator, presented himself as a bank president which poses money laundering risks in Palau.
Use of criminal groups to advance political agenda
The report warned that Beijing is leveraging these transnational crime groups to achieve political objectives.
Investments of the Prince Group, for example, are concentrated near key infrastructure sites, including Koror Port, Palau International Airport, and a radar station, securing land leases of up to 99 years, raising national security concerns.
Another Chinese investor, Sun Maojin, has reportedly produced hack-proof quantum communications ground stations, which could be used for covert military command-and-control operations and sought to obtain land in Palau, the report said.
The report also sheds light on Wang Jizhang, a retired Chinese People’s Liberation Army Navy officer who registered Asia Pacific International Industrial Company in Palau as a cover organization for China to expand its influence.
Wang has reportedly invited Palauan politicians to visit China and maintains close ties with Macau businessman Wan Kuok-koi. Wan was sanctioned by the U.S. Treasury Department in 2024 for alleged illicit investments in Palau and other locations.
Another alleged entity, Palau Southern Palace Development Corporation, is suspected of engaging in influence operations aimed at weakening Palau’s diplomatic alliance with Taiwan, which has only three remaining diplomatic allies in the South Pacific.
China’s aggressive investments in the South and Western Pacific have led several nations to sever ties with Taiwan in favor of Beijing.
After winning re-election last year, Palauan President Whipps Jr. reaffirmed the nation’s diplomatic ties with Taiwan, which in turn, seeks to strengthen economic cooperation with Palau.
A strategic target
Chen Yonglin, a former consul for political affairs at China’s consulate in Sydney and a member of the Australian Values Alliance, told RFA that Palau is a key target for China’s influence efforts as a United Nations member situated in the U.S. military’s strategically important “second island chain,” and one of the few nations maintaining diplomatic ties with Taiwan.
Some Pacific island nations waver between Taiwan and China and make their diplomatic decisions based on economic benefits, which provides opportunities for Beijing’s influence operations, Lee said.
He further warned that the Chinese government and criminal organizations operate in a mutually beneficial manner, similar to how Beijing controlled triads in Hong Kong. If these crime groups gain a foothold in Palau, Beijing would demand their cooperation in political and intelligence operations.
Taiwanese political scholar Yutan Lee also criticized China’s aggressive infiltration tactics, accusing the Chinese Communist Party (CCP) of leveraging corruption and business deals to expand its influence.
“The CCP has no moral bottom line — it’s even more ruthless than people imagine. It uses every possible means to control its citizens, who, in turn, employ all available tactics in business and economics. They’ve been trained to expand outward like ‘wolf warriors,’” Lee said.
Palau urged to counter Chinese influence
The Palauan government should encourage investments from democratic nations to build economic resilience while blocking high-risk investments to mitigate national security threats.
Without such measures, China could use economic leverage to erode Palau’s sovereignty and foreign policy independence, the think tank said.
To read the original story in Chinese, click here.
