"The entire world is worried."

That was Papua New Guinea Prime Minister Peter O'Neill's grim statement at the end of a summit of world leaders yesterday.

The two-day APEC gathering, which took place over the weekend on the Pacific island, was marred by tensions between the US and China.

For the first time in the summit's 26-year history, regional leaders failed to issue a formal joint statement, with Mr O'Neill saying "the two big giants in the room" had been unable to agree.


And all the while, Australia and New Zealand sit in an awkward position.


The bickering between the US and China was largely over trade differences, which for months have been building alongside a multi-billion dollar trade war.

Chinese leader Xi Jinping has urged the world to pursue free trade policies.

In a series of veiled swipes, Mr Xi criticised the Trump administration's foreign policy in a Saturday speech to regional business leaders, saying it would never work in the long run.

"Attempts to erect barriers and cut close economic ties work against the laws of economics and the trends of history," he said. "This is a shortsighted approach and it is doomed to fail.

"We should say no to protectionism and unilateralism."

US Vice President Mike Pence — who attended on US President Donald Trump's behalf — later retaliated saying he was prepared to "more than double" the tariffs imposed on Chinese goods.


Pence also slammed the rising superpower's Belt and Road initiative, warning smaller countries against the "staggering debt" they would face from its loans.

He instead urged them to work with the US, saying it did not "coerce, corrupt or compromise your independence".

Mr Xi insisted there was no "hidden agenda" to the scheme.

Mr O'Neill noted the World Trade Organisation was one of the main issues preventing agreement, but said it was outside APEC's remit.

"APEC has got no charter over World Trade Organisation, that is a fact," he said. "Those matters can be raised at the World Trade Organisation."

Xi said the world should "uphold the WTO-centred multilateral trading system, make economic globalisation more open, inclusive, balanced and beneficial to all".

With concerns growing that rivalry between the US and China could escalate, Xi warned against going down that road.


New Zealand and Australia walk a fine line between China, a large trading partner, and the US, a long-term ally.

Earlier this week, NZ Herald political editor Audrey Young described the tensions between the US and China as not so much a new Cold War as a cold cash war, with both sides using donations to gain influence across the Pacific region.

So far, Prime Minister Jacinda Ardern and Foreign Minister Winston Peters have tried to characterise themselves as partners in the middle, not interested in joining the slinging match between the superpowers.

Read more: Audrey Young: Power - the ironic theme from Apec summit

Australian Prime Minister Scott Morrison has taken a similar approach, attempting to play down tensions on the back of the summit.

"I think there is a lot more pragmatism going on here than people have been prepared to acknowledge in the commentary," Morrison told reporters in Port Moresby on Sunday.

"There's a lot of movement under the water."

He said the growing trade war between the two powers was hurting global economic growth, but he believed both sides wanted to find a resolution.

"I think they're fully aware, because these things also impact their economies," he said.