Prime Minister Scott Morrison has announced a major funding package for the East Timor defence force to counter China but former president Jose Ramos-Horta says he is more worried about its influence in Australia.
Mr Ramos-Horta, the Nobel Prize winner who along with guerilla leader Xanana Gusmao was the face of East Timor during the Indonesian occupation, mocked suggestions that his country was allowing China too much influence.
Former Victorian Premier Steve Bracks is an adviser to Mr Gusmao and said this week that if China funded East Timor's most important economic project, a gas processing plant for the Greater Sunrise field in the Timor Sea, then the small nation could become its strategic ally.
Australia and other Western countries are trying to combat China's alleged "debt-trap diplomacy" in extending credit to small countries, including in the South Pacific, who might find it difficult to say no to China building military-capable facilities.
Mr Ramos-Horta said large natural gas projects always involved multiple potential partners and there were European, Australian, Korean and French companies interested in Greater Sunrise as well as Chinese.
"It is amusing to say the least when I hear Australian academics and journalists, politicians talk about Chinese influence in Timor-Leste, how about Chinese influence all over Australia?" Mr Ramos-Horta told AAP.
For at least 20 years, the Chinese had been investing significantly in Australia, including the Northern Territory leasing Darwin Port, buying factories, companies, land and minerals, coal and gas, he said.
"In our government, in our supreme council in defence and security which I sit in, there have been serious discussions and concern about growing Chinese influence in Australia," he said.
"They then (Australia) comes around and says "oh we're sorry about Chinese influence in Timor".
While East Timor did receive $7 million to $8 million a year in grants from China, it had zero commercial or government loans from them, Mr Ramos-Horta said.
China also built the presidential palace, foreign ministry and defence buildings in Dili.
Indonesia, Singapore and Australia were the largest direct foreign investors in East Timor, he said, ahead of China.
Mr Morrison left Dili on Saturday after joining the country's 20th anniversary celebrations since its independence referendum vote.
He signed a maritime boundary treaty and announced funding help for a subsea fibre optic cable linking the two nations to improve the Internet.
A maritime security package will include two Guardian Class Patrol Boats and funding support for a naval base.
Earlier this year Australia announced it would create a new military unit dedicated to helping Pacific allies, which was viewed as combating Chinese influence.