Prime Minister Lee Hsien Loong has urged the world's two biggest powers, America and China, to take steps towards enhancing trust and preventing mishaps - as China's rise brings about significant change in the world's balance of power.

This will involve the pair becoming more transparent and forming clearer rules of engagement in their relationship, as well as institutionalising exchanges with each other, he said.

In this vein, Mr Lee welcomed the announcement earlier this week that President Barack Obama and President Xi Jinping would be meeting in California next month.

"Holding this retreat so early in their terms shows their desire to work together on common issues," he said.

Mr Lee was speaking on Thursday in Tokyo at the Nikkei Conference on the Future of Asia. In his keynote address, he spoke about the region's prospects for growth and stability, dwelling at length on the US-China relation, which he called the world's most important bilateral relationship, as well as Japan's role in the region.

"Asia is generally peaceful and stable, though there are some tensions," he said.

"The hottest issue is security on the Korean peninsula. But in addition, several regional countries have territorial and maritime disputes with neighbours. Countries must manage these carefully so that they do not destabilise the region."