The loans, which will be provided over the next three years, are aimed at boosting various regional industries, including mining, agriculture, forestry, fisheries and aviation, Wen said on Wednesday.

"China is not rich," Wen said at the opening of the first China-Pacific economic development forum in Fiji. "Still, we are ready to provide assistance without any political strings attached."

Wednesday's summit included only those South Pacific countries whose governments have diplomatic relations with China - the Cook Islands, Fiji, Micronesia, Niue, Papua New Guinea, Samoa, Tonga and Vanuatu.

The decision to exclude the six countries that have relations with Taiwan - Kiribati, the Marshall Islands, Nauru, Palau, the Solomon Islands and Tuvalu - is the latest round in what experts sometimes refer to as "dollar diplomacy" between Beijing and Taipei.

Taipei seeks diplomatic recognition from Pacific islands and other nations to shore up its status as a sovereign government.

Bidding war

Beijing wants to deny the self-ruled island such ties to back its claim that Taiwan, split from the communist mainland since 1949, is part of its territory.

Some critics have said the rivalry between China and Taiwan has resulted in a Pacific bidding war, in which diplomatic recognition is tied directly to aid.

But Wen said China's interest in the region was "not a diplomatic expediency".

China-Taiwan rivalry has led to a
Pacific diplomatic bidding war

"It is a strategic decision," he said. "China has funding and expertise. The island countries are rich in natural resources. Herein lie huge potentials for bilateral co-operation."

Susan Windybank, a Pacific expert at the Australian Center for Independent Studies, said the diplomacy by China and Taiwan has been harmful to the region.

"They've more or less resorted to bribery via aid to get the allegiance of countries," Windybank said on Tuesday before Wen's arrival.

"That's just exacerbated the problems of corruption in the Pacific and has done very little to help the underlying development problems that urgently need addressing."

Special fund

Wen also pledged to establish a special fund to encourage Chinese investment in the South Pacific, and also vowed to cancel all debts held by the poorest of its Pacific allies - Vanuatu and Samoa - that matured at the end of 2005.

China also promised free anti-malaria medicines and assistance in preventing bird flu to all of its diplomatic partners in the region.

The premier's announcement came on top of several multimillion-dollar agreements China already signed with the leaders of individual countries earlier on Wednesday.