US Vice-President Mike Pence warned countries in the Indo-Pacific region not to fall into the trap of Chinese debt diplomacy and encouraged them to choose “the better option” of American development financing instead, in a sharply-worded speech on Saturday (Nov 17) that highlighted the deepening competition between both powers for regional influence.

“We don’t drown our partners in a sea of debt. We don’t coerce or compromise your independence. We do not offer a constricting belt or a one-way road,” he said, in a clear swipe at China’s Belt and Road Initiative, a Beijing-backed trillion-dollar infrastructure spending drive. However, Mr Pence in his speech did not mention China by name.

Speaking at the Asia-Pacific Economic Cooperation (Apec) summit on a cruise ship moored off Port Moresby in Papua New Guinea, Mr Pence said the US had a “principled approach” to financing infrastructure projects in the region, which stood in stark contrast to the predatory behaviour of some other unnamed nations.

“Some are offering infrastructure loans to governments across the Indo-Pacific and the wider world, yet the terms of those loans are often opaque at best."

"The projects they support are often unsustainable and poor quality. Too often they come with strings attached and lead to staggering debt,” said Mr Pence in his speech, delivered immediately after Chinese President Xi Jinping’s.

Mr Pence added: “Let me say with great respect to all the nations across this wider region and the world: Do not accept foreign debt that could compromise your sovereignty. Protect your interest. Preserve your independence. And just like America, always put your country first.”

Mr Pence, who was at the summit in President Donald Trump’s stead, spent his speech laying out the principles underpinning America’s vision of a free and open Indo-Pacific: freedom of navigation and overflight, and respect for other countries’ sovereignty and individual liberties.

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Regional watchers see the US' concept as a counter to China’s aggressive diplomacy and quest for influence in the region, though Mr Pence stressed that it excluded no nation.

He signalled that America would continue taking part in freedom of navigation operations in the South China Sea, naval exercises which China - which claims the disputed waters as its territory - has called for a stop to.

“The US will continue to uphold the freedom of the seas and the skies which are so essential to our prosperity. We will continue to fly and sail wherever international law allows, and our national interests demand. Harassment will only strengthen our resolve. We will not change course,” said Mr Pence.

He also announced that the US would partner with Papua New Guinea and Australia on their joint initiative to upgrade the Lombrum naval base on Papua New Guinea’s Manus Island.

The US would also work to promote civil society, the rule of law and transparent and accountable governance, he said, announcing a US$400 million (S$550 million) Indo-Pacific transparency programme to “empower citizens to combat corruption and strengthen sovereignty”.

There has been a surge in American companies investing in the region’s infrastructure, said Mr Pence, citing a range of examples from power plants in Bangladesh to solar panels in Vietnam and innovation centres in Singapore.

The US has stepped up development financing programmes in a bid to counter China’s influence, and doubled its financing capacity to nearly US$60 billion to drive private sector investment in the region.

The recently-passed Better Utilisation of Investment Leading to Development (Build) Act will revamp and modernise America’s development finance by setting up a new agency with more leeway to make equity investments and other moves that would hopefully spur private investment.

But Asean is concerned that it will have to choose between the US and China, and that tensions between the two powers will destabilise the region.

Mr Pence acknowledged these concerns from Asean and regional leaders that US-China competition would hurt the region economically, or that developments in the South China Sea would increase military tensions - themes that emerged at the Asean summit and related meetings held in Singapore this week.

He said: “The United States of America seeks a better relationship with China, based on fairness, reciprocity and respect for sovereignty... but we want to strengthen the relationship between our two countries, and improve the lives of our citizens.”

Mr Trump and Mr Xi are preparing to meet at the upcoming G-20 summit in Argentina at the end of the month, their first meeting in person since the tit-for-tat trade war began in earnest.

“We believe that progress could be made between our two nations, even as the US remains in a strong position,” said Mr Pence. “China has an honoured place in our vision of a free and open Indo-Pacific, if it chooses to respect its neighbours' sovereignty, embrace free, fair and reciprocal trade, and uphold human rights and freedom.”

He warned, however, that the US would stand up to countries with unfair trade practices, calling out China for having “taken advantage of the US for many, many years” with its tariffs, quotas, forced technology transfers, intellectual property theft and industrial subsidies.

“We’ve taken decisive action to address our trade imbalance with China. We put tariffs on US$250 billion of Chinese goods and we could more than double that number," said Mr Pence.

"But we hope for better. The US will not change course until China changes its ways."