China debt 'not a trap' but US disagrees

Prime Minister Scott Morrison has warned APEC leaders against burdening small nations with debt.
Prime Minister Scott Morrison has warned APEC leaders against burdening small nations with debt.

China wants Asian and Pacific leaders to know its infrastructure loans aren't a trap, the United States says they are and Australia is walking a fine line between the two.

The arms race over funding Pacific projects is ramping up as Australia, the US and Japan take a renewed interest in the region to counter China's growing influence.

Chinese President Xi Jinping told an Asia Pacific Economic Cooperation meeting in Port Moresby on Saturday his Belt and Road Initiative is a co-operative, consultative funding program.

"It is not designed to serve any hidden geopolitical agenda," President Xi said.

"It is not targeted against anyone and it does not exclude anyone.

"Nor is it a trap, as some people have labelled it."

But US Vice President Mike Pence gave a strong rebuttal to China, which was met with stony silence from the Chinese delegation.

He said loans to developing countries are too often opaque and encouraged nations to look to the US instead of China.

"Too often they come with strings attached and lead to staggering debt," he said in his speech.

"Do not accept foreign debt that could compromise your sovereignty.

"Just like America, always put your country first."

Australia has not signed up to the BRI but Prime Minister Scott Morrison said he will work with his largest trading partner on transparent, long term projects.

"(Infrastructure) that meets genuine needs and avoids unsustained debt burdens," Mr Morrison said.

"It must be in the interests of the country in which you are seeking to invest."

China has been criticised for leaving smaller nations with huge debts for dubious projects and there was some evidence of that in Port Moresby.

The road from the airport to the port was one of the city's best but China ripped it up and entirely rebuilt it ahead of the summit.

Locals told AAP the project used Chinese materials, workers and aid funding, which was effectively returned to Chinese companies.

Mr Morrison also urged countries to stick with the World Trade Organisation, which is facing a push from some nations to undermine it.

"We're just listening carefully and we're hearing what the various views are about what some of the frustrations are in relation to the WTO," Mr Morrison told reporters.

President Xi said the WTO's special and differential treatment of developing countries was "not to be challenged" and urged them to make their own choices.

"Blindly copying the development model of others would only be counter productive," he said.

Leaders will continue to meet on Sunday as they discuss trade and security in the region.

Australian Associated Press