The once sleepy seaside town of Sihanoukville on Cambodia's south-west coast has been transformed by Chinese cash, but the rapid pace of development has divided locals and raised fears about China's quest for power.

Key points: Cambodia denies it has signed a secret deal to allow China to base troops at one of its naval bases

Cambodia denies it has signed a secret deal to allow China to base troops at one of its naval bases Chinese investors have built casinos, resorts and an airport in Cambodia's south-west

Chinese investors have built casinos, resorts and an airport in Cambodia's south-west US Vice-President Mike Pence has warned Cambodia about Chinese influence in the nation

The signs of Chinese influence are hard to miss here.

Dozens of hotels and casinos covered in Chinese signage have been built, largely bankrolled by Beijing's cash, but the investment has pushed up land and rent prices and forced out local Cambodians.

China has even built a special economic zone on the fringes of the city to allow it to increase trade through Cambodia.

You Veasna worked as a street vendor selling food in Sihanoukville, but said he could no longer compete for business after the influx of Chinese investment.

You Veasna says competition from Chinese investors has driven him out of business. ( ABC News: Kathryn Diss )

"I am affected by the flow of Chinese people," he said.

"I cannot afford to compete with them, so I lost my business. Many others have too."

But it is the Ream Naval Base, 30 kilometres from the town, which analysts say China really has its sights set on.

In recent days, the small and rundown base has been at the centre of speculation over China's bigger plans for military control on the region.

A senior Cambodian defence official has rubbished reports the country has signed a secret deal with China to allow Beijing to place armed forces at Ream Naval Base.

In a move that has been seen as sidelining its relationship with the United States, the reported deal would allow China to host military assets and station troops at Ream for 30 years.

Cambodia's defence spokesman General Chhum Sutheat says reports of the Chinese naval base are "fake news". ( ABC News: Kathryn Diss )

But in an exclusive interview with the ABC, Cambodia's defence spokesman General Chhum Sutheat repeatedly rejected the suggestion as "fake news".

"So far Cambodia has never signed any deal with China to host military in Cambodia," he said.

"The news report is baseless, and you can say it is fabricated or distorted information to defame Cambodia."

Playground for tourists or Chinese military base?

Chinese investors have built casinos in Cambodia's remote south-west. ( ABC News: Kathryn Diss )

Cambodia has leased huge tracts of land totalling 45,000 hectares to Chinese companies to build a mega-resort which will include a casino, an 18-hole golf course and a jetty.

An international airport with a 3-kilometre-long tarmac — long enough for commercial jets and military aircraft to land — is also part of the Dara Sakor Seashore Resort Long Term Project.

China is also constructing a deep-sea port in Koh Kong, west of the base, which reportedly would have the ability to take navy frigates and military aircraft.

An airport with a 3-kilometre tarmac is being constructed in Dara Sakor. ( Supplied: Planet )

Earlier this year, US Vice-President Mike Pence wrote a letter to the Cambodian Government warning the construction boom looked suspiciously like plans for a Chinese military base.

General Sutheat said Cambodia welcomed investment from all countries, but pointed out it was against Cambodia's constitution to allow foreign forces to be based in the country.

"We have repeatedly said we have never received military presence in Cambodia and we will not allow any foreign forces in Cambodia," he said.

Construction crews around Ream Naval Base are also busy.

Construction is underway outside the Ream Naval Base in Sihanoukville. ( ABC News: Kathryn Diss )

At the entrance to the base, navy engineers are rebuilding a bridge which, like many of the facilities here, is run down and in need of repair.

The new bridge would allow for heavy machinery to pass — something which would be needed to dredge the port if the pier was to ever host ships larger than navy patrol boats.

China has also rejected the suggestion, instead saying the two countries were conducting "good cooperation" in "exercises, training and logistics equipment".

John Blaxland, a security analyst from Australian National University, said the world should take anything China says with a grain of salt.

"This is actually a significant development, a significant ratcheting up of China's presence of its military reach," he said.

A construction boom in south-west Cambodia has raised suspicions China is trying to get a military foothold in the region. ( ABC News: Robert Killorn )

Ream would give China access to the Gulf of Thailand and influence over a long-touted proposal to build a canal through Thailand.

That would provide an alternative shipping route to the Malacca Strait, a crucial maritime chokepoint.

"[It increases] its ability to influence the outcome in what is to Chinese economics essentially the jugular vein of East Asia — the Malacca Strait," Professor Blaxland said.