The Sydney Morning Herald said Beijing had approached Port Vila about the possibility, potentially upsetting the delicate strategic balance in the region.

China has been aggressively growing its military and pushing its footprint deeper into the Pacific, forging closer links by showering nations with development money.

The Herald, citing multiple sources, said Beijing's military ambition in Vanuatu would likely be realised incrementally, possibly beginning with an access agreement allowing Chinese naval ships to dock routinely for refuelling.

This arrangement could then be built on, it added, with intelligence and security figures in Australia, New Zealand and the United States becoming increasingly worried about China's growing influence.

Australian Foreign Minister Julie Bishop, who travelled to Vanuatu last weekend with Britain's Prince Charles, said she was confident of Canberra's strong relationship with Port Vila.

"I'm not aware of a military offer being made by China to Vanuatu," she said, noting that the Vanuatu government had said to the newspaper it was not aware of such proposal.

While China has been investing in infrastructure around the world, to date it has only established one military base -- in Djibouti in northern Africa.

"We have very good relations with Vanuatu and I remain confident that Australia is Vanuatu's strategic partner of choice," Bishop added.

New Zealand Prime Minister Jacinda Ardern said she had read the Herald report and "I can't comment on the validity of that".

"But what I can say is that we of course keep a watching eye on activity within the Pacific and that New Zealand is opposed to the militarisation of the Pacific generally."

Australia's Lowy Institute estimates China provided US$1.78 billion in aid, including concessional loans, to Pacific nations between 2006-16.

Earlier this year, Beijing lodged a formal diplomatic protest after a senior Australian minister called Chinese infrastructure projects in the region "white elephants".

During the spat, Australia's International Development Minister Concetta Fierravanti-Wells said the Pacific was "full of these useless buildings which nobody maintains", built by China.

She also warned that unlike loans from the World Bank and the Asian Development Bank, Chinese financing had less than favourable terms.

"We don't know what the consequences are when (Pacific nations) have to pay back some of these Chinese loans," she said.

Beijing responded that it "fully respects the will of the Pacific islands' governments and their people" and that development aid "has brought real benefits to local people".

China has diplomatic relationships with eight Pacific island nations -- the Cook Islands, the Federated States of Micronesia, Fiji, Niue, Papua New Guinea, Samoa, Tonga, and Vanuatu.

Six other Pacific countries recognise self-ruled Taiwan, which China sees as part of its territory.