In a major speech, Xi also stressed that there would be no winners from a trade war or a new cold war amid increasing rivalry between the world's top two economies.
"Attempts to erect barriers and cut close economic ties work against the laws of economics and the trends of history. This is a short-sighted approach and it is doomed to failure," Xi told business leaders on the sidelines of the summit.
"We should say no to protectionism and unilateralism," Xi said, in a veiled swipe at the "America First" policies of Donald Trump's administration.
APEC members the US and China have become embroiled in a trade war that experts warn could be catastrophic for the global economy, with the world's top two powers going head to head.
The pair have imposed tariffs worth billions of dollars of each other's goods and there is little sign of an immediate easing in tensions, with both sides threatening to step up action if necessary.
Xi said the world should "uphold the WTO-centered multilateral trading system, make economic globalization 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.
"History has shown that confrontation – whether in the form of a cold war, hot war or trade war – will produce no winners," he said.
"We believe that there exist no issues that countries cannot resolve through consultation," said the Chinese leader, as long as negotiations take place in a spirit of "equality" and "mutual understanding."
Xi also defended his country's massive "Belt and Road" infrastructure initiative amid attacks that it is akin to "checkbook diplomacy" to further Chinese interests in the region.
"It is not designed to serve any hidden geopolitical agenda, it is not targeted against anyone and it does not exclude anyone... nor is it a trap as some people have labelled it," he said.
Speaking at the same forum, Australia's prime minister also issued a passionate defense of free trade and lashed out at protectionist trends battering the global economy.
"Tit-for-tat protectionism and threats of trade wars are in no one's interest economically and undermine the authority of the global and regional trade rules that benefit us all," said Scott Morrison.
US President Donald Trump has decided to skip the APEC summit, which some critics say has left the stage free for China to bolster its influence in the region.
In contrast to Trump, Xi arrived two days before the summit, opening a new road and a school in Port Moresby and holding talks with Pacific Island leaders.
Papua New Guinea rolled out the red carpet for the Chinese leader, with dozens of people from various tribes serenading him sporting parrot feathers, possum pelts and seashell necklaces.
Officially, the 21 leaders from Asia-Pacific countries will discuss improving regional economic cooperation under the theme of "embracing the digital future" but trade tensions are likely to dominate.
Foreign ministers meeting ahead of the summit were unable to publish a joint statement, apparently due to differences over language on World Trade Organization reform.
In the absence of Trump and Russian President Vladimir Putin, the summit has been relatively low key and the focus has turned to the venue Port Moresby.
The capital of Papua New Guinea has been ranked as one of the least liveable cities for ex-pats, with a high level of crime, often perpetrated by feared street gangs known as "raskols".
Delegates have been advised not to venture out alone – especially after dark – and officials and journalists have been hosted on massive cruise ships moored in the harbor due to safety issues and a dearth of hotel rooms.
The run-up to the summit was also overshadowed by the purchase of 40 luxury Maserati cars which sparked anger in the poverty-hit country which suffers from chronic health care and social problems. – Rappler.com