Located off the coast of Australia, Vanuatu is strategically placed for a possible military base especially for China as it flanks Japan and the USA, however, the Foreign Minister of Vanuatu emphasised that it is not interested in any sort of military base. China's defence ministry said the Fairfax report "completely did not accord with the facts" while a foreign ministry spokesman said the report was "fake news".
While China is already said to be in talks with Pakistan to acquire the latter's military base near the Chabahar port in Iran, it looks like Beijing also wants to spread its wings in the Pacific island nation of Vanuatu.
"The maintenance of peace and stability in the Pacific is of utmost importance to us", Mr Turnbull told reporters in Brisbane on Tuesday.
New Zealand Prime Minister Jacinda Ardern said she had read the Herald report and "I can't comment on the validity of that".
Ms Bishop said while China was investing in infrastructure around the world, in had to date only established one military base - in Djibouti in northern Africa.
Vanuatu's Foreign Minister Ralph Regenvanu told ABC's Pacific Beat a report of preliminary discussions between the two countries in the Sydney Morning Herald was incorrect.
Rory Medcalf, head of the National Security College at the Australian National University, said in a report for the Lowy Institute think tank in Sydney: "Any future naval or air base in Vanuatu would give China a foothold for operations to coerce Australia, outflank the United States and its base on USA territory at Guam, and collect intelligence in a regional security crisis".
Vanuatu's Foreign Minister has denied the country is in talks with China about a possible military base in Vanuatu and said its Government was not interested in any militarisation of the country.
If the plan materializes, it will also be a threat to the USA as it would shake-up the country's dominance in the Pacific. "We are not interested in militarisation, we are just not interested in any sort of military base in our country", he said.
However, a senior official of the Vanuatu government said that such discussions have never taken place and China isn't planning to build a military base in the island nation.
Vanuatu's high commissioner in Canberra, Kalfau Kaloris, was quoted as saying his country's foreign ministry was "not aware" of China's determination to build a permanent presence on the island.
A Chinese embassy spokesman said the idea was "ridiculous".
Such a plan would mark an expansion of China's military aspirations beyond its controversial activities in Asia, particularly the South China Sea, where it has been building artificial islands on reefs, some with ports and airstrips.
Djibouti's position on the northwestern edge of the Indian Ocean has fuelled concerns in India that it will become another of China's "string of pearls" military alliances and assets ringing India, including Bangladesh, Myanmar and Sri Lanka.
But he said it was important the Pacific be maintained as a peaceful region.
"I think this is much more about China's long-term ambitions than some sort of short-term reaction to anything the U.S. has done", he said.