SYDNEY • Australia is refocusing its foreign aid programmes in a move to win hearts and minds in the island nations of the Pacific, as an increasingly assertive China flexes its muscles in the region.

It has pledged more than A$1.3 billion (S$1.3 billion) - a rise of A$200 million from last year and its largest ever aid commitment to the Pacific - to fund projects including an undersea communications cable to Papua New Guinea and the Solomon Islands. The government said the reorientation of aid priorities, revealed in a budget on Tuesday, reflected "the fundamental importance to Australia of the stability and economic progress of Pacific island countries".

Canberra and other regional capitals have become increasingly alarmed at China's push into the Pacific which could potentially upset the strategic balance in the region.

Australia's Lowy Institute estimates China provided US$1.78 billion (S$2.38 billion) in aid, including concessional loans, to Pacific nations between 2006 and 2016.

And reports last month - which were denied - said Beijing wanted to establish a permanent military base in Vanuatu.

The extra A$200 million in aid, which will also go towards a new High Commission in Tuvalu, means the Pacific now represents some 30 per cent of Canberra's total aid budget, which stood still at A$4.2 billion. Aid agencies were quick to criticise the freeze in overall aid funding, at just 0.23 per cent of national income despite a significant boost to government revenues from a pick-up in commodity prices and employment growth.

"This budget was an opportunity to show leadership and use some of the unexpected revenue to repair past damage to aid," said Australian Council for International Development chief executive Marc Purcell.

In contrast, neighbour New Zealand this week announced a significant rise to foreign aid, delivering A$668 million in extra funding over the next four years, largely directed at the Pacific.

Meanwhile Australia, a US ally, is also concerned over the expansion of Chinese military influence in the disputed South China Sea.

Foreign Minister Julie Bishop has said any military build-up would run counter to China's commitments, in an apparent reference to Chinese President Xi Jinping's 2015 pledge not to militarise the waters.

China has landed a military plane on the last of its three airstrips in the South China Sea, Washington-based research institution Asia Maritime Transparency Initiative (AMTI) said this week. Satellite images from April 28 showed the first confirmed deployment of a military aircraft - a Shaanxi Y-8 transport plane - on Subi Reef. The structure hosts one of three runways China has built as part of a massive dredging and reclamation operation in the Spratlys chain since 2013, and was the last of three where military aircraft had been observed.

About 100 Philippine civilians and a small military garrison are stationed on the Thitu islet, about 12 nautical miles away from Subi.

The Chinese Ministry of Foreign Affairs said it was not aware of the situation described by AMTI.

China claims more than 80 per cent of the South China Sea, a US$5 trillion-a-year shipping route where five other countries including the Philippines and Vietnam also have claims.

REUTERS, BLOOMBERG