Palau's President Surangel Whipps Jr says diplomacy with China does not have to mean abandoning Taiwan.
Whipps is calling for a unified stance in the region, stating that fellow island nations should not feel pressured by Beijing's increasingly aggressive posture towards Taipei.
He told RNZ's Pacific Waves that boundaries in the Pacific neighbourhood must be respected in accordance with international norms.
"A Chinese ambassador asked us to have diplomatic relations with China and we said, 'we have no problem having diplomatic relations with China'. What we have a problem with is [China] telling us that we cannot have diplomatic relations with Taiwan," Whipps said.
"Now it seems tensions continue to rise, and we want to promote peace...that is why it is important that we stand together," he said.
Palau is one of four Pacific island states that officially recognises Taiwan; the three others include the Marshall Islands, Nauru and Tuvalu.
He said it was concerning that more countries were severing ties with Taiwan, which "begins to signal that they are not a country."
Palau has one of the highest per capita participation of citizens in the US military because of its bilateral agreements with Washington under the Compacts of Free Association.
"We see that tensions are rising," Whipps said.
"We believe in 'presence is deterrence'. It just reminds us that we all need to be prepared because do not want to ever go through World War 2 again."
The leader said the world can see what was happening with Russia's invasion of Ukraine with no peace agreement in sight.
But he is hoping the China and Taiwan dispute could be resolved through diplomatic means.
"It is important that we align ourselves with people that believe in boundaries, rule of law, democracy and freedom because we need to protect those values."