China’s ambassador has branded “ridiculous” the idea that Beijing is threatening the sovereignty of small Pacific nations by building infrastructure that saddles them with unsustainable debt.

His comments followed remarks by Foreign Minister Julie Bishop that the Australian government was concerned some Chinese financing arrangements in the Pacific would damage the island nations' sovereignty and that Australia would offer alternatives to Chinese infrastructure development.

Speaking in Canberra, ambassador Cheng Jingye indicated he was not aware of Ms Bishop’s remarks but said the proposition China was creating so-called debt-traps for small nations was “ridiculous”.

“We have a growing economic co-operation with some of the island countries. They are on [an] equal footing and I think it’s mutually beneficial, as has been said by the local people - both the local people and both the government," he said.