The publication released on Tuesday by the Australian Strategic Policy Institute found that China's abuse of its economic power in the broader region posed the biggest threat to island states.

The report comes in the wake of the creation of the new AUKUS trilateral pact between Australia, the United States and United Kingdom, which was designed to counter the rise of China in the region.

While the report found that many smaller nations in the Indo-Pacific may be at risk of economic coercion by China, countries abiding by international economic rules would counter that threat.

The size of island nation governments contributed to the risk.

"Countries with powerful elites that dominate the economy and politics may be relatively more vulnerable to economic coercion," the report said.

"Such systems could facilitate targeted coercion at relatively lower costs to the sending country because only a small number of people need to be pressured."

Larger countries in the Indo-Pacific, like Australia, have been in the middle of "proxy economic wars" with China such as export bans.

However, the report said such measures taken against Australia by China were used to demonstrate that the size of Australia was not a defence against any potential economic actions.

"The non-democratic nature of China's political system makes it easier for Chinese state actors to pursue political or security objectives in a non-transparent manner," it said.

"China's increasing interest in the island states of the Indo-Pacific has led to concern that the imbalance in those relationships is so large that both domestic and broader regional stability are at risk."

It was argued that Australia and other larger nations in the area such as Japan had a key role to play to ensure the protection of smaller nations and to quell the rising influence of China.

"International partners should work with Indo-Pacific island states to help strengthen the ability of local businesses to take collective action," the report said.

"Regional groupings have a key role in assisting Indo-Pacific island states to denounce bad international behaviour."

Chinese influence in the Pacific was a key talking point during the most recent meeting of Quad leaders in Washington, which included Prime Minister Scott Morrison, US President Joe Biden, Indian Prime Minister Narendra Modi and Japanese Prime Minister Yoshihide Suga.

Australian Associated Press