By Jeff Mason and Kirsty Needham

ABOARD AIR FORCE ONE/SYDNEY (Reuters) -U.S. President Joe Biden will arrange another summit of Pacific island leaders this year after the disappointment caused by his cancellation of a visit to Papua New Guinea due to the domestic debt ceiling crisis, his national security adviser said on Wednesday.

Political analysts said Biden's cancellation of the short visit to Port Moresby planned for next Monday after a G7 summit in Japan had dealt a blow to U.S. credibility in the Pacific island region, where Washington is competing with China for influence.

Asked en route with Biden to Japan whether the decision to cancel gave Beijing an advantage, Jake Sullivan, the president's senior security adviser, said the U.S. saw the "demand signal for the United States only growing for the Pacific islands."

"Within this calendar year, you will see the president convening the leaders of the Pacific islands for a major summit, which will be the second time in 12 months he has done that," Sullivan told reporters aboard Air Force One.

Sullivan said the summit had yet to scheduled, "but we will get it on the books, so that we continue the progress with the Pacific Islands."

Biden hosted an unprecedented summit of Pacific island leaders last year.

His three-hour stop in Port Moresby next Monday would have been a first there by a sitting U.S. president, and the island nation had declared a public holiday in his honor. Biden had been scheduled to meet 18 Pacific island leaders there.

"They're obviously disappointed that the President will not be the first ever President of the United States to go to Papua New Guinea," Sullivan said.

"But they are also very mindful of the fact that this President has done more in terms of his personal engagement with the Pacific islands than any previous president."

DEBT CEILING

The crisis over the U.S. debt ceiling - an issue with the potential to damage the global economy - prompted Biden to postpone visits to both Papua New Guinea and Australia to allow him to return earlier to Washington.

He had been due to meet in Sydney with leaders of the other countries of the Quad grouping - Australia, Japan and India - but they will now talk in Japan.

The stop in Papua New Guinea, a nation of 9 million north of Australia, had been viewed as a major step to build trust in a region where China has sought a greater security presence.

"For Papua New Guinea this was a very big deal and they will be disappointed," said Mihai Sora, a Pacific islands analyst with Sydney's Lowy Institute think tank, calling it a "blow to U.S. credibility in the region as a consistent partner."

"Up until now Pacific islands leaders have been giving the U.S. the benefit of the doubt over its ability to re-engage."

Biden's decision recalled President Barack Obama's cancellation of a trip to attend two summits in Asia in 2013 because of a U.S. government shutdown.

Papua New Guinea Prime Minister James Marape said this week his government was preparing to sign a major defense pact with the United States and a security agreement allowing U.S. Coast Guard vessels to patrol its waters. He made no public comment about Biden's cancellation.

Some opposition party politicians have criticized the pact as potentially upsetting China, a major infrastructure donor.

THREE VISITS BY XI

Richard Maude, a former Australian intelligence chief now with the Asia Society Policy Institute said the cancellation could be a setback for relations.

"The mantra in the region is all about turning up. Turning up is half the battle. China turns up all the time, and so the optics aren't great," he said.

Chinese President Xi Jinping has visited the region three times, including a 2018 visit to Papua New Guinea.

The Pacific islands span 40 million square km of ocean, where vital sea lanes and submarine cables link the United States to its allies Australia and Japan. But leaders there had complained to the U.S. of being seen as "fly over" countries.

China last year struck a security pact with the Solomon Islands, where a Chinese state company will rebuild the international port. Beijing has continued to lobby for a bigger role in the region, after failing to sign 10 nations to a security and trade deal.

Washington has made progress in renewing strategic pacts with two Pacific island states - Micronesia and Palau - under which it retains responsibility for their defense and provides economic assistance while gaining exclusive access to large strategic areas of the Pacific in return.

It expects those to be formally signed at a ceremony in Papua New Guinea on Monday. A third pact with the Marshall Islands has yet to be finalized and is due to expire this year.

(Reporting by Kirsty Needham in Sydney, Jeff Mason on Air Force One and David Brunnstrom, and Andrea Shalal and Rami Ayyub in Washington; additional reporting by Lucy Craymer in Wellington; editing by Nick Macfie, Don Durfee and Grant McCool)