Australia revamps Pacific strategy to counter China

• Canberra offers Pacific island nations billions in loans, grants
• Two nations should not be seen as rivals: China

Beijing and Canberra should be cooperating in the South Pacific and not be cast as strategic rivals, China's top diplomat said yesterday, after Australia launched a multi-billion dollar fund to counter China's rising influence in the region.

Standing alongside Australian Foreign Minister Marise Payne, Chinese State Councillor Wang Yi made the conciliatory remarks after a meeting in Beijing widely billed as a step toward re-setting bilateral ties after a lengthy diplomatic chill.

Wang said that he had agreed with Payne that the two countries could combine their respective strengths and embark on trilateral cooperation with Pacific island countries.

"We are not rivals, and we can absolutely become cooperation partners," Wang told reporters, describing the meeting as important after the recent "ups and downs" in the relationship.

Payne said the discussions were "valuable, full and candid".

But even as his foreign minister visited Beijing, Prime Minister Scott Morrison characterised the Pacific as its domain while offering the region up to A$3 billion ($2.18 billion) in cheap infrastructure loans and grants.

"This is our patch, this is our part of the world," Morrison said in his most detailed foreign policy speech since becoming prime minister in August.

Speaking in Queensland, Morrison said Australia would invest in telecommunications, energy, transport and water projects in the region.

He also said Australia would also expand its diplomatic presence in the Pacific, posting staff to Palau, the Marshall Islands, French Polynesia, Niue and the Cook Islands.