Vanuatu's foreign minister has denied Australian media reports that his country is considering hosting a Chinese military base.
Bishop said Australian engagement with South Pacific nations was "one of our highest foreign policy priorities" and that Australia had partnered with China on development projects in the region, for example an anti-malaria project in Papua New Guinea.
China has been aggressively growing its military and expanding its footprint deeper into the Pacific, forging closer links by showering nations with development money.
But today Vanuatu's Foreign Minister Ralph Regenvanu rejected the report. The report, citing unnamed sources, said no formal proposal had yet been made, but preliminary talks have been held about locating a full military base on Vanuatu. "We are not interested in militarisation, we are just not interested in any sort of military base in our country".
Chinese foreign ministry spokesman Geng Shuang also shot down the speculation at a regular press briefing in Beijing on Tuesday, calling it "fake news".
"I remain confident that Australia is Vanuatu's strategic partner of choice", she said.
Chinese President Xi Jinping and Djibouti's President Ismail Omar struck a deal to establish China's first overseas naval base in Africa.
While, New Zealand's PM Jacinda Ardern said: "New Zealand is opposed to the militarisation of the Pacific".
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Australian Foreign Minister Julie Bishop visited Vanuatu with Prince Charles on Saturday in a diplomatic tour that it's understood was aimed at demonstrating the merits of the Commonwealth's commitment to a free and open system of global rules.
"I would hope the upsurge in the paranoia about China in Australia is not used to destroy or denigrate the good relationship Vanuatu has with Australia", he said.
Such a Chinese presence would make the seas "more crowded" for the Royal Australian Navy, though professional forces could manage this safely and it would not stop Australian or U.S. forces operating where they needed to, he said.
Vanuatu is one of the few countries that steadfastly support Beijing's controversial island-building programme.
Six other Pacific countries recognise self-ruled Taiwan, which China sees as part of its territory.
China has also become increasingly active in the South Pacific, undertaking several infrastructure projects and providing aid and financing to small, developing island nations in the region.
Medcalf said a Chinese military base on Vanuatu would pose significant problems for Australian interests.
Located off the coast of Australia, Vanuatu is strategically placed for a possible military base especially for China as it flanks Japan and the United States, however, the Foreign Minister of Vanuatu emphasised that it is not interested in any sort of military base. Djibouti's position on the northwestern edge of the Indian Ocean has fuelled worry in India that it would become another of China's "string of pearls" military alliances and assets ringing India, including Bangladesh, Myanmar and Sri Lanka.