Australia’s Fairfax Media revealed on Monday that China is planning to build a permanent military base on the island of Vanuatu, which would put Chinese warships on “Australia’s doorstep.”

Officials from Vanuatu disputed the claim, insisting their country will remain non-aligned.

According to the Australian report, discussions between China and the government of Vanuatu are still in the preliminary stages, and no formal proposal has been made yet. However, Beijing has been pouring a great deal of money into Vanuatu of late, including new offices for the Vanuatu government, a convention center, a sports stadium, a massive school, and a new residence for Prime Minister Charlot Salwai.

A chart supplied with the report notes that Vanuatu is far more indebted to China than any other creditor, including the World Bank. The assumption is that China will want something valuable, like a military base, in exchange for all that investment.

China has carried out a similar program of debt imperialism in other areas. Either China expects certain concessions promptly in exchange for massive infrastructure investment, or waits for debtor nations to default on their loans before suggesting creative methods of partial repayment, such as the indebted nation surrendering control over key facilities desired by Beijing.

Another factor in evaluating the relationship between Vanuatu and China is that Vanuatu is one of the very few countries to support China’s aggressive territorial claims in the South China Sea.

“A base less than 2000 kilometers from the Australian coast would allow China to project military power into the Pacific Ocean and upend the long-standing strategic balance in the region, potentially increasing the risk of confrontation between China and the United States. It would be the first overseas base China has established in the Pacific, and only its second in the world,” Fairfax Media notes.

CNBC reported on Tuesday that Australian Foreign Minister Julie Bishop asked about China’s interest in a military base during her visit to Vanuatu.

“The government of Vanuatu has said there is no such proposal, but it is a fact that China is engaging in infrastructure investment activities around the world. I remain confident that Australia is Vanuatu’s strategic partner of choice,” said Bishop.

CNBC countered by noting that Bishop did not explicitly rule out the possibility that preliminary discussions about a military base had been held.

A spokesman for the Chinese embassy in Vanuatu derided the Fairfax Media report as “ridiculous” on Tuesday and said it would be “impossible” for China to establish a military base on the island. He insisted China has ships in the Pacific Islands for purely humanitarian reasons, pointing to upcoming disaster response drills with New Zealand and Vanuatu.

Vanuatu’s Foreign Minister Ralph Regenvanu spoke to the Australian Broadcasting Corporation on Tuesday, assuring them that “no one in the Vanuatu government has ever talked about a Chinese military base in Vanuatu of any sort.”

Regenvanu added that he was “not very happy about the standard of reporting in the Australian media,” and hoped the “upsurge in the paranoia about China in Australia is not used to destroy or denigrate the good relationship Vanuatu has with Australia.”

Australian Prime Minister Malcolm Turnbull did not sound completely reassured by Regenvanu’s assurances.

“We would view with great concern the establishment of any foreign military bases in those Pacific Island countries and neighbors of ours. What those countries are looking to us and other nations for is investment in economic infrastructure and social infrastructure,” Turnbull said on Tuesday, in what the ABC interpreted as a “warning” to Vanuatu.

Australia is concerned that China is muscling into its sphere of influence in the South Pacific and seeking to diminish Australian economic and diplomatic influence. Taiwan has similar concerns, but they are even more pronounced, as China has forced a number of regional governments to shut down Taiwanese trade offices as part of Beijing’s effort to isolate Taiwan. U.S. analysts worry that an increased Chinese naval presence in the South Pacific would be intended to counter American influence.

“It’s probably more psychological than it is strategic. But in peacetime, it just sort of increases the Chinese shadow into that area,” ventured Ralph Cossa of the Council for Security Cooperation in the Asia Pacific, as quoted by Australia’s ABC.