Former US secretary of state Henry Kissinger warned Thursday that an armed conflict could break out between the United States and China if they fail to resolve their trade war.

The sober remarks from Kissinger, who was instrumental in normalising diplomatic relations between Washington and Beijing, came at a conference in Beijing on the future of the two economic giants.

"If conflict is permitted to run unconstrained, the outcome could be even worse than it was in Europe," he said at the Bloomberg New Economy Forum.

"World War I broke out because of a relatively minor crisis ... and today the weapons are more powerful," the former top diplomat said.

China and the US have been caught in a trade dispute for 18 months, with the two sides struggling to reach an agreement despite a series of negotiations.

Tensions have also been running high on the diplomatic front.

Beijing has lashed out at Washington over US naval operations in the disputed South China Sea, US criticism of China's mass detention of ethnic Uighurs and US Congress support for pro-democracy protesters in Hong Kong.

"China is a major economic country. And so are we," Kissinger said. "And so we are bound to step on each other's toes all over the world."

The 96-year-old said that during the Cold War between the US and the Soviet Union, a plan to reduce the nuclear capacity of both countries was a top priority.

But because conflicts between the US and China have always been "passive", he warned there is no framework for Washington to deal with Beijing as a "military power".

If the two sides keep seeing "every issue in the world in terms of conflict" with each other, it could be "dangerous for mankind", he said.

Kissinger said the trade negotiations were just a "substitute" for more substantial talks about conflicts between the two, including tensions over Hong Kong.

When asked if unrest in the semi-autonomous region of China could be the "flashpoint" for a new Cold War, Kissinger said he hoped the "highly emotional" issue would be "settled by negotiations."

- 'Wrong direction' -

Former president Richard Nixon's secretary of state flew secretly to Beijing in 1971 to begin talks on new relations between the US and Communist China.

Kissinger still has the ear of top Chinese officials, who give him the red carpet treatment when he visits Beijing.

He held a meeting with President Xi Jinping in the Chinese capital in November last year.

In a later session at the forum, former US treasury secretary Henry Paulson said he believed the US and China "are now headed in precisely the wrong direction."

He warned of growing barriers on visas and the movement of people, restrictions on trade and technology, and that the ongoing economic tensions would "leave our countries and the entire world worse off."

"When the next crisis comes, and it will come because financial crises do come, we will regret it big time if the world's two biggest economies do not have the mechanisms to cooperate," said Paulson, who was treasury secretary under former president George W. Bush.

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