China using ‘payday loan diplomacy’ in the Pacific, claims new US ambassador to Australia

China is using “payday loan diplomacy” to exert influence in the Pacific, the new US ambassador to Australia said on Wednesday, in comments that threaten to inflame regional tensions.

The United States and its regional allies have been battling China for greater influence in the Pacific – a region that has votes at international forums like the United Nations and controls vast swathes of a resource-rich ocean.

The geopolitical competition has seen both sides increase foreign aid to the region in recent months, which the West says is needed to prevent the Pacific falling into financial distress and becoming susceptible to diplomatic pressure from Beijing.

Late last year US Vice-President Mike Pence accused China of ensnaring tiny island nations in foreign aid “debt traps”.

New US ambassador to Australia Arthur Culvahouse said Pence’s criticism was not strong enough.