In November last year, the Papua New Guinean Government signed a memorandum of understanding (MOU) to look at building a $200 million "comprehensive multi-functional fishery industrial park" on Daru Island, which borders the Torres Strait.
The proposal has raised alarm in Australia about national security and potential overfishing in the region.
A delegation of Australian Department of Foreign Affairs staff from the Australian High Commission in PNG travelled to Daru this month for a series of meetings and discussions about the proposal.
They met with the local governor, Toboi Awi Yoto, who was a signatory to the MOU.
The Governor has now hit out at the Australian Government on Facebook, saying Australia had no counter-offer to the Chinese plan and that he "was not satisfied with their intentions for my people to remain the same" when many are living in poverty.
Some locals are concerned the development would "vacuum" up seafood in the area.(ABC News: Natalie Whiting)"As usual, they came with no alternative plans to counter and deter any foreign direct investment, especially to alleviate poverty and improve social services," he wrote.
He said that was actually "good" for him "to advance my plans to explore opportunities that are available" in relation to the Chinese bid.
"It's regrettable that all they want is for us to be subsistence farmers and fishermen and maintain our current status quo."
The Governor, who titled the post "WE WILL NOT SWAY" said: "We never reached any common ground.
"Those who were with me in that meeting can confirm that they lost the plot and minced their words," he wrote.
"Yet I am reliably informed that back in Canberra, it has been reported that we had fruitful meeting in Daru when it wasn't."
Mr Yoto said he was "aware that Australians are working behind my back to have my people not to support any foreign direct investment".
