Palau is one of the fewer and fewer countries that still recognize Taiwan as the legitimate government of China, much to the chagrin of Beijing. And this despite the fact that Chinese tourists now provide a large amount of business.
This is because, despite the above-mentioned policy, Chinese nationals can travel to Palau visa-free, which of course makes it a very attractive destination for a tropical vacation.
China recently tried to make the point that enough is enough, and made it more difficult for tour operators to organize trips to Palau. But there are still quite a few who do come, so much so that there are a number of Chinese restaurants in Koror which cater mostly to them.
Some of these Chinese settle in Palau, some try and become naturalized citizens. For one, foreigners can't buy land or businesses alone, they can only be only co-owners with a local Palauan partner.
Another reason is that a Palau passport is one of the most coveted ones in the region, as its proud owners can travel visa-free in 118 countries around the world, including the USA. Though a far cry from Japan's 190 visa-free destinations, it is much better than most. Chinese nationals can go to 74 countries visa-free. Taiwanese can travel to 148 countries, exactly twice as many.
I should be quite happy with Italy's 188 destinations, which puts my country at the n.5 spot in the world, after Japan with 191, Germany with 190, Singapore and South Korea with 189.