The Sydney Morning Herald reported his comments following remarks by Foreign Minister Julie Bishop that the Australian government was concerned some Chinese financing arrangements in the Pacific would undermine the islands' sovereignty.
She said Australia would aim to offer alternatives to Chinese infrastructure development.
Ambassador Cheng Jingye said the idea China wanted to create debt-traps for the Pacific nations was "ridiculous".
China's relationships with Pacific nations were on an equal footing which was mutually beneficial, he said.
Julie Bishop had told Fairfax Media Australia on Monday that Australia was concerned about the economic viability of small Pacific nations and did not want unsustainable debt burdens imposed on them.
She said Australia should take "a very proactive role" in offering Pacific nations alternatives to Chinese projects.