China has donated a newly built presidential palace worth millions of dollars to the Pacific island nation of Vanuatu, the latest move by Beijing to assert its presence in the region.

Vanuatu's Prime Minister Charlot Salwai and Chinese officials toured the building in the capital of Port Vila as part of a handover event.

The Chinese embassy said in a statement that the palace represents a milestone in their bilateral relationship of more than 40-years.

China has also donated two other new government offices, housing Vanuatu's finance and foreign affairs ministries.
Australian public policy think tank Lowy Institute estimates the cost of the new palace complex to be as much as 21 million dollars.

However, there are already some concerns about Vanuatu's ability to maintain the new buildings.

In 2016, China handed over the National Convention Centre, with a seating capacity of one thousand. But the Vanuatu government has faced a budget shortfall for maintaining the facility ever since.

The US and China are competing for influence in the Pacific region. On Wednesday, Vanuatu's government released a new national strategy for foreign policy, emphasizing the country's "non-aligned" status.

Prime Minister Salwai is expected to visit China before attending an international meeting in Japan in mid-July.