Members of the business community in Vanuatu's capital say new Chinese immigrants have been flouting the law to get easier access to other countries as investors.
Authorities in Vanuatu have begun a crack-down on illegal sales of citizenship certificates and passports.
Beverley Tse was in Port Vila and looked into the issue.
Here in Port Vila, most of the retail and wholesale stores are owned by Chinese people.
A Chinese businessman who has lived in Port Vila for four decades says the main objective for these people is to make money. Ferdinand Wong says some new immigrants from mainland China have set their sights on larger countries in the Pacific and believe it is easier to enter as an investor with Vanuatu citizenship than with Chinese citizenship.
"FERDINAND WONG (THROUGH TRANSLATOR): If they want to emigrate overseas to Australia or New Zealand or USA, that's difficult to apply for. But in Vanuatu, applying takes no time. It's easy. So probably some are here for a few years before they apply to go to Australia or New Zealand."
The chairman of the Port Vila Chinese Club, Jean-Baptiste Leong, says there is a common belief that many of them have not complied with the law that requires them to reside in Vanuatu for ten years before gaining citizenship. He says Vanuatu is used as a stepping stone to greater opportunities elsewhere and says Chinese always find a way to achieve what they want.
JEAN-BAPTISTE LEONG: With the money, you're doing everything you like. I know some people, some Chinese they easily [get] the Vanuatu passport, [in] less than 10 years you have a Vanuatu passport. I don't know what... something we do... but I know it's possible maybe with the money.
The executive director of the Port Vila-based think tank, the Pacific Institute of Public Policy, says Vanuatu's permanent residence visa scheme with Hong Kong, whereby successful candidates can reside in Vanuatu, is also being abused. Derek Brien says some mainland Chinese are using it to settle in Hong Kong or Macau.
DEREK BRIEN: As I understand the rules of migration from mainland China to Hong Kong or to Macau you need to either have a special permit or you need to show that you're moving on somewhere else. So by having that permanent residency stamp in your passport, demonstrates that you have an onward destination, in this case to Vanuatu. It doesn't mean that once you cross the border into Macau or Hong Kong that you get on the plane and come to Vanuatu.
The president of the anti-corruption watchdog Transparency International, Marie-Noelle Ferrieux Patterson, says when she was the ombudsman in the 1990s there were reports of politicians selling citizenship and diplomatic passports. She says politicians are treated too well by Chinese people and it has led to bribery and corruption.
MARIE-NOELLE FERRIEUX PATTERSON: This type of behaviour basically affects both the reputation of our Vanuatu leaders and also the Chinese people who are actually doing that. But to have illegal practices is not acceptable.
The government is conducting a commission of inquiry into the issue and the Ministry of Foreign Affairs is reviewing the appointments of all the country's diplomatic passport holders. Meanwhile, police have declined an interview, but have confirmed officers have been investigating the alleged illegal granting of citizenship and have made several arrests. Those who have been investigated include politicians, leaders and public servants.