A tiny Pacific island wonders what it will lose by welcoming a giant tourist resort

The people of Yap, a flyspeck of an island in the western Pacific, learned long ago how to make money the hard way: They carved giant stone currency and ferried it across open ocean in canoes.

These days, islanders are split over how to make money in a global economy — and in particular what to do with a tide of Chinese money now washing up on these remote shores.

Deng Hong, a Chinese real-estate developer, envisions a billion-dollar, 4,000-room casino-and-golf resort that he promises would quadruple the island’s annual economic output to $200 million.

But residents of this 39-square-mile (101-square-kilometer) patch of volcanic rock worry whether what they will get is worth what they will give up. Chinese tourists and imported workers would double Yap’s population, and to make room for the resort some Yapese would have to leave their ancestral coastal villages of thatch-roofed homes for new housing provided by the developer.

Residents of the tiny Pacific island of Yap speak out on whether to allow a massive Chinese real estate project.

“Yapese are not as aggressive as Chinese coming with lots of money,” said Henry Falan, the speaker of Yap’s 10-man legislature, which has passed laws trying to block the project. “I don’t see much future in subjugating ourselves on our own island.”

Still, even project opponents agree that Yap — with a population of 11,000 — must learn self-sufficiency. The island has long relied on U.S. aid, which is scheduled to end in 2023.

Seized by Japan in 1915, Yap became a U.S. protectorate after World War II and gained independence in 1986, as part of the Federated States of Micronesia. Since then, the U.S. has provided subsidies that account for 70% of public spending on Yap. In 2011, the U.S. contribution came to US$15.5 million. A treaty also gives U.S. military dominion over the area.

“Yap has to do something,” said Gov. Sebastian Anefal during the signing of a development agreement with Mr. Deng last summer.

The American money supports a languorous blend of modern life — cellphones, cars, prepared foods —with an easygoing island culture that has survived some 3,000 years on the bounty of fish-filled waters, rain forests and the mild narcotic pleasures of the betel nut, which is still widely used.

There are no traffic lights or retail chains. Most people live on their own land, sustained by fresh fish, crab, chickens, banana and coconut trees and patches of taro. Unemployment is 6 percent, with about half of Yap’s workers employed in public service, including schools, law enforcement, road work and health care. Some families receive remittances from Yapese working in the U.S., which requires no visa. Many Yapese serve in the U.S. military.

“You don’t work hard, nobody pushes you around,” said Aloysius Faimau, a 66-year-old paramount chief, an ancient title that is part of a complex social hierarchy tied to land ownership and village affiliation. “If you want to earn money, go to Guam, Hawaii or the United States.”

Per capita U.S. aid to Micronesia and other nearby Pacific-island nations is the highest of anywhere in the world, more than US$1,000 a year. Concerned that Micronesia has grown dependent on aid, Washington nudged its island allies to attract private investment.

In a 2007 speech, David Cohen, then deputy assistant secretary for the U.S. Interior Department’s Office of Insular Affairs, which oversees relations with Micronesia, said islanders should embrace modern investment.

He pointed to a precedent: Christianity, which “was alien to the Pacific until the 19th Century,” he said. “Today, it is a fundamental part of most Pacific cultures.”

Having been claimed by Spain in the late 16th century, sold to Germany in 1899, seized by Japan in 1915 and surrendered to the U.S. at the end of World War II, Yap answered this latest challenge by turning to China. Early in 2011, Micronesia’s embassy in Beijing began pitching the idea of transforming the island into a resort.

Deng, a developer of convention centers and resorts in China, made an exploratory trip in August 2011 and liked what he saw: sparsely populated beaches; crystal-clear water, and dense groves of mahogany and coconut trees, with ferns and tropical flowers.

The island resort, if built, would be the first investment abroad for Mr. Deng’s company, Exhibition and Travel Group, or ETG.