SINGAPORE — Amid renewed tensions between the United States and China over reclaimed islands in the South China Sea, Prime Minister Lee Hsien Loong yesterday warned regional leaders that every Asian country stands to lose if regional security and stability are threatened.

Delivering the keynote address at the Shangri-La Dialogue, Mr Lee set out what needs to be done to ensure a stable regional order, which requires consent and legitimacy in the international community and “cannot be maintained by just by superior force” in the long run. He also called on China and the Association of South-east Asian Nations (ASEAN) to conclude a Code of Conduct on the South China Sea “as soon as possible, so as to break the vicious cycle and not let the disputes sour the broader relationship”.

“If all parties adhere to international law... that is the best outcome,” he said. “On the other hand, if a physical clash occurs, which escalates into wider tension or conflict, either by design or more likely by accident, that would be very bad.”

He added: “But even if we avoid a physical clash, if the outcome is determined on the basis of might is right, it will set a bad precedent. It may not lead immediately to a hot conflict, but it will be an unhappier and less sustainable position.”

In recent weeks, US and China exchanged increasingly angry barbs over the reclaimed islands. On Thursday, Beijing defended its building of the artificial islands and accused Washington of stirring up trouble in the economically vital region.

Chinese Foreign Ministry spokesperson Hua Chunying said no outside actors had the right to dictate to China in an area it claims as its sovereign territory. Ms Hua’s remarks came less than a day after US Defence Secretary Ashton Carter delivered the strongest US warning yet against Beijing’s moves in the South China Sea, demanding a halt to land reclamation in disputed waters and vowing that Washington would remain Asia’s leading power “for decades to come”.

Mr Lee is the second Singapore leader in recent weeks to urge China and ASEAN to swiftly agree on the code. Earlier this month, Defence Minister Ng Eng Hen had called on the two parties to “expeditiously” do so as maritime territorial disputes, if left unchecked, could be disruptive to the global economy.

Away from the territorial disputes, Mr Lee said that World War II continues to cast a shadow over relations between Japan and its neighbours China and South Korea, even though it had ended 70 years ago. “It is past the time to put this history behind us properly, like the Europeans have done. This requires statesmanship and largeness of spirit on both sides,” he said.

Japan needs to acknowledge past wrongs, and Japanese public opinion needs to be more forthright in rejecting the more outrageous interpretations of history by right-wing academics and politicians, Mr Lee said. While Japan has made apologies in general terms, its positions on specific issues such as comfort women and the Nanjing massacre has been “less than equivocal”, he noted.

At the same time, Japan’s neighbours need to accept the country’s acknowledgements and “not demand that Japan apologises over and over again”.

Mr Lee said: “The history of the war should not be used to put Japan on the defensive, or to perpetuate enmities into future generations. Only with largeness of heart can all sides move forward to reduce distrust and build up cooperation.”

Mr Lee stressed the importance of positive relations between the US and China, and the need for the former to be part of the Trans-Pacific Partnership (TPP). “The US-China relationship is fundamentally different from the US-Soviet relationship of old. It is not a zero-sum game. There are elements of competition, but many interdependencies and opportunities for mutual benefit,” he said.

A step towards establishing the TPP involves the passing of the Trade Promotion Authority (TPA) by the US Congress. The TPA provides the US President with the authority to negotiate international agreements that Congress can approve or disapprove, but cannot amend or filibuster.

“Failing to get the TPP done will hurt the credibility and standing of the US not just in Asia, but worldwide,” Mr Lee said.

Mr Lee said he expects that the US, China and Japan will remain major powers, while India will play an increasing role in the region. He hopes the world will continue to have an open global system of trade, investment and economic cooperation, and “certainly free trade in the Asia-Pacific instead of the current alphabet soup of trading arrangements”.

“It should not be a world where might is right, the strong do what they will and the weak suffer what they must,” he said. “It should be a world where legitimacy and constructive engagement are the international norm, and every country, big and small, can compete peacefully for a chance to prosper.”

Read PM Lee's full speech here