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Australia's International Development Minister Concetta Fierravanti-Wells has raised concerns about how unsustainable levels of debt risk destablising Pacific nations.
She says the Australian Government welcomes investment from other nations, but not if it becomes a burden for developing economies.
This comes after reports China was in talks with Vanuatu about a possible naval base at Luganville.
The Vanuatu Government has since said the reports are false.
The Sydney Morning Herald reported Senator Fierravanti-Wells saying island nations should be aware that loans come with conditions and that aid donors and lenders should take into account the economic vulnerability of developing nations.
She said Australia welcomes contributions but it doesn't believe the debt burden should be increased.
Ms Fierravanti-Wells said Canberra's priority is to ensure a stable, secure and prosperous Pacific.