Prime Minister Anthony Albanese has rebuffed China's attempts to pressure Pacific leaders over Taiwan's presence at a major regional summit. 

The diplomatic clash erupted after China's Pacific envoy publicly warned there would be 'consequences' following Taiwan's attendance at the opening ceremony of the Pacific Islands Forum (PIF) in Palau.

The Prime Minister repeatedly refused to answer questions on Tuesday about whether Beijing was bullying the host nation, instead stressing the importance of Pacific-led decision making and avoiding direct criticism of China.

'This is a paradise here in Palau, and one of the things that is obvious as you've been walking around here is how friendly and how peaceful this place is,' Albanese said.

'I'm focused on members of the Pacific family. And that is precisely the meetings that I have scheduled here. I think this is primarily a gathering of the Pacific family, the members of the Pacific Islands Forum.'

'The Pacific Islands Forum determines what happens here, not any other country.'

The dispute overshadowed the opening of the 55th Pacific Islands Forum leaders' meeting in Koror, Palau, where regional leaders had hoped to focus on climate change, development and regional cooperation.

Palau is one of only 12 countries that formally recognises Taiwan rather than Beijing and used its hosting rights to invite Taiwanese Foreign Minister Lin Chia-lung to Monday night's opening ceremony.

The move triggered an immediate response from China.

China's Pacific envoy, Qian Bo, said he had raised 'serious concern' with both the Palauan government and forum organisers.

'We have made our position very clear to the government of Palau and the Pacific Islands Forum secretariat,' he said.

Asked whether there would be consequences, Qian was blunt.

'There will always be consequences,' he said.

'It should not have happened. We think it's very inappropriate.'

China regards Taiwan as part of its territory under its 'One China' principle, while Taiwan maintains it is a sovereign state. 

The dispute has become one of the region's most sensitive geopolitical fault lines.

Palau President Surangel Whipps Jr used his opening address to deliver what appeared to be a thinly veiled rebuke of outside powers seeking to influence Pacific nations.

'The world increasingly recognises the strategic importance of our region and we welcome friends and genuine partnerships,' Whipps said.

'Our partners are welcome to sail with us, but they do not choose our destination.

'The Pacific agenda must be driven by us, for us, and the Forum must remain the political home in which that agenda is shaped.'

Taiwan's attendance does not breach any existing Pacific Islands Forum rules. While China participates as a dialogue partner and can attend formal sessions, Taiwan holds development partner status with more limited access.

Following his complaints to Palau and forum officials, Qian said he intended to continue raising the issue during meetings with dialogue partners.

The Taiwan dispute comes as the summit grapples with an unusually long list of absences.

Leaders from Fiji, Kiribati, New Caledonia, Samoa, Solomon Islands and Vanuatu are not attending for a range of reasons, while Kiribati has not sent any political representative.

Albanese rejected suggestions the absences undermined the forum's relevance.

'From time to time, the Pacific Islands Forum has had issues with people not participating. Everyone's participating at this forum,' he said.

'There is a presence here. And everyone is focused on outcomes at this forum.'

He later added: 'This is a well-attended meeting of the Pacific Islands Forum, and I don't think it's productive to talk it down. I'm talking it up.'