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China's ambassador in Suva, Qian Bo, says any Chinese company found acting irresponsibly over the Malolo Island project will be sanctioned.
The Fiji Times reports Mr Qian saying he is closely following the controversy.
Freesoul Real Estate Development is facing charges over damage caused by construction of a resort on the island after media revealed massive destruction there.
Mr Qian said some mainland Chinese were involved and they had been called in and cautioned.
He said the embassy was still in the process of identifying the parties involved but if any companies on the mainland had any connection to the project, they would be sanctioned.
He said China was a champion of protecting the environment and would not allow Chinese companies to act in such a manner.
