Tourism is just one part of China's alleged playbook. Beijing has also been trying to strengthen relationships with local leaders: Palauan officials say they have repeatedly been invited to Beijing for visits.
On one such visit, a former Palauan governor said he asked why Taiwan couldn't become independent.
"Taiwan is part of China", replied a Chinese Communist Party official, looking furious.
With China's intensifying military activities around Taiwan, including air and sea patrols, the US has claimed that China is readying its military to be capable of invading it.
To contain China's potential aggression towards Taiwan and overall military activities in the western Pacific, the US has ramped up its own military infrastructure buildup in Palau.
Over the years, Washington has been upgrading airstrips, building Tactical Multi-Mission Over-the-horizon Radar system (Tacmor) used to monitor military activities in the Pacific, and planning on expanding Malakal Harbour, Palau's main port, to accommodate larger military vessels.
For many Palauans, talk of high-level geopolitical struggle feels distant, yet its ripples are everywhere. The US military expansion, Chinese investment, and rumours of hidden agendas feed a growing sense of unease.
"This administration is very hawkish towards China, and I think it's ridiculous," said the former governor of Angaur, who opposes the construction of Tacmor. "We should concentrate on the environment and less on China-US relations".
A petition circulating in recent months asks Washington to spell out its contingency plans in the event of war – a sign of how deep the anxiety runs. It calls on the US to "reassure the people of Palau" that civilians will be protected if conflict was o break out.
"We know what the geopolitics looks like between China and the US," said one resident. "And we are scared our island will be destroyed by a war we don't want to be part of".