China leases Pacific island. Its residents are shocked.

SYDNEY — The island of Tulagi served as a South Pacific headquarters for Britain then Japan, and during World War II, its natural deepwater harbor made it a military gem. Now, China is moving in with plans to effectively take control.

Under a secretive deal signed last month with a provincial government in the South Pacific nation, a Beijing-based company with close ties to the Chinese Communist Party has secured exclusive development rights for the entire island and its surroundings.

The lease agreement has shocked Tulagi residents and alarmed U.S. officials who see the island chains of the South Pacific as crucial to keeping China in check and protecting important sea routes. It is the latest example of China using promises of prosperity to pursue its global aspirations — often by funneling money to governments and investing in local infrastructure projects that critics call debt traps for developing nations.

“The geography tells you that this is a good location,” said Anne-Marie Brady, a China scholar at the University of Canterbury in Christchurch, New Zealand. “China is expanding its military assets into the South Pacific and is looking for friendly ports and friendly airfields just like other rising powers before them.”

Beijing’s ambitions in the South Pacific have economic, political and military ramifications.

The region is rich in natural resources, and China’s investments have provoked worries in the United States and Australia that the projects could give Beijing an opening to establish a military foothold for everything from ships and planes to its own version of the Global Positioning System.

Even compared to previous Chinese development deals in nearby countries — including a wharf in Vanuatu, whose terms were not publicly released for...