Pacific nations are valued in the defence plans of major world powers because of their strategic location, including for monitoring and controlling naval movements across the Pacific Ocean, the Lowy Institute report said.
It noted intense rivalry between countries like China, and the US and its allies Australia and Japan, for influence in the region.
"China's outreach and activities in the region appear indefatigable" and were being matched by US allies including the largest aid donor Australia, it said.
"Faced with this new 'great game', Pacific island countries have become diplomatic price-setters and are leveraging increased competition to maximise development benefits," said the report authors Mihai Sora, Meg Keen and Jessica Collins.
It warned that this "unbridled strategic rivalry" challenged good governance and transparency, and small Pacific island states risked being overwhelmed.
The competing interests of donor countries were pulling Pacific Islands in different directions, swamping small bureaucracies, and risked distracting from local priorities, it said.
Pacific islands' vulnerability to climate change is being leveraged, the report says. (Mick Tsikas/AAP PHOTOS)
China had became a major player in the region, in development finance, ports, airports and telecommunications, and has sought a greater role in the military, policing, digital connectivity and media.
The Pacific islands' vulnerability to climate change was also being leveraged, with external partners offering assistance for access to the Pacific, the report said, without naming the countries.
"Mobilising naval and air assets for disaster response involves securing rights to use ports, airstrips, and maritime routes", prompting large powers to jostle to be the first to respond, the report said.
China has hosted three Pacific Islands leaders for extended tours of the North Asian country ahead of the Pacific Islands Forum leaders meeting in Tonga, which begins on Monday.
Fiji's Prime Minister Sitiveni Rabuka met Chinese President Xi Jinping in Beijing on Tuesday, even as Fiji's government signed a deal with the US Peace Corps to recruit software engineers and announced Google would build a $US200 million ($A297 million) data centre to support a new subsea cable.
The leaders of Vanuatu and Solomon Islands visited China in July.
The report found Pacific countries were "asserting their needs more boldly in international engagements, asking for better deals on trade, labour mobility, digital connectivity, and climate resilience".
