The Papua New Guinea Government says Australia has nothing to fear from increasing Chinese influence in the country.
The Australian Government is becoming increasingly alarmed about Chinese investment and aid — usually in the form of concessional loans — to developing countries on its doorstep.
But Papua New Guinea's Foreign Affairs Minister, Rimbink Pato, has moved to reassure Australia that Papua New Guinea can manage its relationship with both countries.
"Papua New Guinea remains a close, reliable and trusted friend of Australia, we'll work through all the issues of concern together," he said.
Australia's International Development Minister, Concetta Fierravanti-Wells, questioned the benefits of some Chinese projects in the Pacific.
"China is making contributions around the world and PNG is no exception," he said.
"PNG is available to receive and to partner in where it matters most to suit the interests of our people and our country."
Mr Pato said the country's long history of receiving Australian aid taught it how to assess and manage foreign funding.
"Using the experience with Australia, we will work alongside all the other development partners to ensure that we get the processes right," he said.
"There'll be some projects which have challenges, but we'll work through those challenges."