US Defense Secretary Mark Esper visited the island nation last week and accused Beijing of "ongoing destabilising activities" in the Pacific.

Palau President Tommy Remengesau later revealed he told Esper the US military was welcome to build facilities in his country, an archipelago about 1,500 kilometres (930 miles) east of the Philippines.

"Palau's request to the US military remains simple -- build joint-use facilities, then come and use them regularly," he said in a letter to the US defence chief that his office released this week.

The note, addressed to Esper and marked "by hand delivery, Koror. Palau," said the nation of 22,000 was open to hosting land bases, port facilities and airfields for the US military.

Remengesau also suggested a US Coast Guard presence in Palau to help patrol its vast marine reserve, which covers an area of ocean the size of Spain and is difficult for the tiny nation to monitor.

While Palau is an independent nation, it has no military and the US is responsible for its defence under an agreement with Washington called the Compact of Free Association.

Under the deal, the US military has access to the islands, although it currently has no troops permanently stationed there.

"We should use the mechanisms of the Compact to establish a regular US military presence in Palau," Remengesau said.

"The US military's right to establish defense sites in the Republic of Palau has been under-utilised for the entire duration of the Compact."

- 'Predatory economics' -

He said bases in Palau would not only increase US military preparedness but also help the local economy, which is struggling as the Covid-19 pandemic has halted tourism, its main industry.

Palau was the scene of bloody fighting between US and Japanese forces in World War II but Washington focused on bases in the Philippines and Guam after the war.

A US military radar facility is planned for Palau but construction has been suspended because of the pandemic, with the island nation keen to retain its virus-free status.

In addition to its close US ties, Palau is also one of Taiwan's four remaining allies in the Pacific and only 15 worldwide.

China, which sees Taiwan as part of its territory, has set about trying to win over Taipei's allies in the Pacific, persuading the Solomon Islands and Kiribati to switch sides last year.

Palau has refused, prompting Beijing to effectively ban its tourists from visiting the country in 2018.

While not naming China directly, Remengesau told Esper "destabilising actors have already stepped forward to take advantage" of the virus-related economic crises that small island nations were experiencing.

"Mr. Secretary, it has been a great relief to hear you, and other top US officials, recognise the complex reality of Indo-Pacific security -- which is as threatened by predatory economics as it is by military aggression," he wrote.

During Esper's visit last week, which lasted barely three hours, Remengesau said China was offering cheap loans to island nations to win their loyalty.

"That has an impact on how people view the relationship with those who help them," he said.