Chinese investment in Palau has dried up since the Pacific nation granted asylum to six former Guantanamo detainees from the Chinese Muslim Uighur minority, President Johnson Toribiong said this week.

Responding to questions from a US Senate committee about China's reaction to Palau's decision to accept the Uighurs in 2009, Toribiong said his government had faced sustained pressure from Beijing.

"In three separate meetings with Palau's UN mission, the government of China stated that it considered this 'a very serious issue for Chinese-Palauan relations'," Toribiong said in a written response released this week.

"(China said) that the issue was 'not a legal issue but a political one' and, ominously, that China had 'a long memory'."

The Uighurs were part of a group of 22 arrested at a camp in the mountains of Afghanistan after the US-led invasion of the country began in October 2001, a month after the September 11 attacks on the United States.

The men, from China's remote northwestern region of Xinjiang, were detained at Guantanamo Bay but cleared of any wrongdoing four years later, prompting Beijing to call for their repatriation.

The United States refused to send them back to China for fear they would be persecuted after Beijing described them as terrorist suspects.

Palau, formerly a US-administered territory and still heavily reliant on US aid, eventually agreed to take them on a temporary basis until a permanent home could be found for them. They still remain there.

Toribiong said that shortly after the Uighurs' arrival, construction stopped on a Chinese-backed five-star hotel in Palau even though the 100-room project was almost finished.

"I am advised that the Chinese investor, who by that time had invested several million dollars into the project, can no longer get money out of China for the project," he said.

Toribiong also said that "a previously expected increase in Chinese tourist arrivals to Palau never materialised" after the country agreed to take in the Uighurs.

He said Palau, which has a population of about 20,000, had agreed to Washington's request to take the Uighurs "without hesitation, when no other nation would even consider providing such refuge".

The Palau leader was responding to questions from a US Senate committee which is determining how Washington should fund the Pacific state under a compact of free association between the two countries.

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