Deep divisions between the United States and China have derailed the APEC meeting in Port Moresby, with regional leaders failing to agree on a final communique for the first time in the summit's history.

Key points: The US and China were unwilling to compromise, leaving other nations frustrated

The US and China were unwilling to compromise, leaving other nations frustrated Divisions between the "giants" threatened to dwarf any other progress made at APEC

Divisions between the "giants" threatened to dwarf any other progress made at APEC But PNG insisted the summit had been a success that included "fruitful discussions"

The two regional powers clashed repeatedly over the language on trade in the final document, with Beijing angrily rejecting paragraphs that called for an overhaul of the World Trade Organisation (WTO) and warned against unfair trade tactics.

The Trump administration has repeatedly accused China of economic coercion, and the two nations have already slapped competing tariffs on exports worth billions of dollars.

Papua New Guinea's Prime Minister Peter O'Neill, who was hosting APEC, said there were disagreements between the two "giants" at the meeting, adding the "entire world is worried" by tensions between the nations.

China's President Xi Jinping has a compelling message for the Pacific's island nations: they now have a choice of benefactors. ( AP: Mark Schiefelbein )

But he insisted the summit had still been a success and allowed leaders to have "fruitful discussions … and exchange frank views".

One source familiar with negotiations told the ABC that China and the US had both taken an uncompromising approach to the language, and it was "impossible" for other countries to hammer out a compromise.

"The US was determined to include a strong message on trade and the WTO in the communique, and China was determined to get rid of that language," the source said.

"So the negotiations fell in a heap and the chair [Papua New Guinea] gave up."

Another source told the ABC that Australia, Indonesia and Vietnam were all pushing the US and China to reach a compromise, but without success.

Prime Minister Scott Morrison praised Mr O'Neill for having the "courage" to be upfront about the outcome of the summit.

"If the major powers here are not going to agree, we shouldn't be pretending they do and we shouldn't be trying to smooth that over for the sake of a communique," he said.

"We should call it out."

But Mr Morrison said a debate between the two powers was not surprising and cautioned that overstating the tensions could be dangerous.

"The other economies around the table here, it's been made very clear to both the US and China that we want to see these issues resolved," he said.

"That's what is in our interests, and we've presented those positions to both the United States and China with the opportunities we've had here."

Federal Opposition Leader Bill Shorten said he was disappointed about a "lost opportunity" at the APEC summit.

"I don't think that we can live in a world of denial and think that APEC was a success when it wasn't," he said.

"Australia will have to redouble its effort with other members of APEC to help bridge the sharp economic divide, which is currently growing across the Pacific."

Sorry, this video has expired Morrison responds to reports of "diplomatic blow-up" at APEC summit

The confrontation highlighted how rising tensions in the region have complicated the routine business of diplomacy — although some experts were already questioning the usefulness of the APEC summit.

Tensions had been rippling through the summit before the final leaders' meeting on Sunday.

On Saturday Chinese diplomats stormed into the office of PNG Foreign Affairs Minister Rimbink Pato, demanding changes to the draft communique.

Mr Pato refused to meet them, and the officials only left after security was called.

The director general of China's Department of International Economic Affairs, Wang Xiaolong, played down the divisions, only saying there were "discussions" about trade issues at APEC.

Conflicting visions for the region made it difficult to draft a summit communique. ( Supplied: PNG Government )

But he said many of the points of disagreement were beyond the scope of APEC, and could only be hammered out by the WTO.

"Those issues related to WTO will have to be discussed and decided … with the involvement of countries and economies beyond the APEC region," he said.

"At the end of the day what happens to the WTO has to be decided by the full WTO membership."

The stoush over trade came against the backdrop of deepening regional competition between China and the US in the Asia-Pacific.

China has been building its influence in the region, and Chinese businesses are now deeply invested in Pacific island countries.

Chinese President Xi Jinping was feted by Papua New Guinea during a formal state visit on Friday, and Western leaders were watching closely when he met with leaders of Pacific island nations.

On Sunday the tiny nation of Tonga announced it had signed up to China's Belt and Road initiative and received a reprieve on debt payments from Beijing.

But the US and its allies have also been keen to demonstrate they are determined to reassert their presence in the South Pacific.

On Sunday, Australia, the US, New Zealand and Japan announced they would pour millions of dollars every year into an ambitious effort to bring electricity to 70 per cent of people in Papua New Guinea.

The US also announced it would partner with Australia and Papua New Guinea to upgrade the Lombrum Naval Base on Manus Island, which could hand Washington another crucial strategic outpost in the Pacific.

US Vice-President Mike Pence traded barbs with Mr Xi the day before the leaders' meeting, accusing China of economic espionage and using debt-trap diplomacy to coerce small countries in the region.

Sorry, this video has expired What happens when countries can't repay their Chinese loans? (Photo: AP)

But Mr Xi warned the US against a trade war, saying Washington risked an economic conflagration.

"Mankind has once again reached a crossroads," he said.

"Which direction should we choose? Cooperation or confrontation? Openness or closing doors?"