Taiwan has stepped in to help its ally Palau attract more tourists after an airline from the Micronesian nation said it was forced to shut under pressure from China.

Taiwan's battle to protect its few remaining official allies has intensified as relations with Beijing deteriorate.

Four former allies of Taiwan have switched diplomatic recognition from Taipei to Beijing since 2016 as China offers economic incentives to jump ship.

China sees Taiwan as part of its territory awaiting reunification, by force if necessary, even though the island views itself as a sovereign nation and is a self-ruling democracy.

Tensions have escalated under President Tsai Ing-wen since she came to power two years ago as she has refused to accept both sides are part of "one China".

Palau has maintained ties with Taiwan but now one of its airlines, Palau Pacific Airways, says it has been forced to suspend operations because of a plunge in Chinese tourists.

A letter from the airline's Taiwanese owner, Sea Passion Group, to Palau's national congress accused Beijing of branding Palau "an illegal tour destination", denting its business.

The airline said it believed it had been targeted "most likely due to lack of diplomatic status".

A Palau-based member of staff from the airline told AFP the shutdown would happen after August and would halt flights to and from Hong Kong and Macau, the only two routes it operates.

Taiwan's foreign ministry said Thursday that Taiwan's national airline, China Airlines, has added two more weekly flights to Palau between June and August "to assist in attracting more overseas visitors".

"Helping our diplomatic allies with economic development is one of the important tasks in promoting bilateral cooperation," it said in a statement.

In 2016, tourists from China made up 47 percent of all visitors to Palau, a Pacific island group with a population of 22,000. Taiwan tourists accounted for 10 percent of visitors.

But in is letter to Palau's congress, Sea Passion Group said the number of air travellers using its flights fell 16 percent from January to June this year against the same period in 2017 and ticket prices dropped 45 percent to $300.

Taiwan's local media reported China had imposed a ban last November on tours to Palau and the Vatican -- also one of Taiwan's allies -- and that agencies could face a steep fine if they run trips to those destinations.

The number of group tourists from China to Taiwan has also plunged in recent years as relations sour.

In addition, Beijing has used it growing clout to force multinational firms to list Taiwan as a province of China, including Australian airline Qantas, clothing supplier Gap and hotel chain Marriott.

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