Relations became strained after Lee made a "private and unofficial" visit to Taiwan in July last year, a month before becoming prime minister. He was deputy premier at the time.

China, which regards Taiwan as part of its territory awaiting reunification by force if necessary, reacted angrily to the visit.

"Our relations with China are back on track," Lee said in a speech late Sunday as part of Singapore's 40th independence anniversary celebrations.

He cited a successful visit here by the National People's Congress (parliament) chairman Wu Bangguo in May. Chinese Vice Premier Wu Yi is scheduled to visit the city-state in September.

"I am looking forward to visiting China later this year, to strengthen our ties further. Our 'one China' policy remains unchanged," Lee said.

Lee said Singapore remains a "friend to both sides of the Taiwan Strait" and expressed satisfaction that cross-strait relations have stabilised.

"As a small country, we put great emphasis on good external relations," he said referring to ties with the Association of Southeast Asian Nationsand other major trading partners.

"I am happy that over the last year, we have strengthened these relations further, both with ASEAN countries and also with other important partners such as India and Japan.

"Last month, in Washington I signed the Strategic Framework Agreement with President Bush. This will help us to broaden and deepen our cooperation with the US, especially in security and defence, with the present emphasis on counter-terrorism."

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