The relationship between the US and China is unlikely to improve soon and the world is not likely to return to the low levels of inflation and interest rates it has enjoyed in recent decades, Singapore Prime Minister Lee Hsien Loong said on Monday, warning that a storm is gathering around us .

China has announced halting of cooperation with the United States in a number of areas, including dialogue between senior-level military commanders and climate talks, in retaliation to US House of Representatives Speaker Nancy Pelosi's visit to Taiwan.

Last week, Pelosi visited Taiwan, prompting Beijing to hold military exercises in waters around the self-ruled island.

Around us, a storm is gathering. US-China relations are worsening, with intractable issues, deep suspicions and limited engagement between them, said Lee in his National Day message.

Singaporeans also have to be prepared that the region may not be as peaceful and stable as it has been so far, he said on the eve of Singapore's 57th National Day.

He said the world is not likely to return to the low levels of inflation and interest rates it has enjoyed in recent decades.

While Singapore has weathered the test of the COVID-19 pandemic, the road ahead will not be easy and Singaporeans have to stand united, Lee said.

"Singapore will be buffeted by intense rivalry and tensions in the region around us. What can we do about this? Staying united is key to Singapore's survival it is the only way to deal with challenges in an increasingly troubled world," he said.

Lee said Singapore must maintain a strong and credible Singapore Armed Forces (SAF) and Home Team.

We must also brace ourselves and be psychologically prepared that in the next decades our region may not be as peaceful and stable as it has been thus far, he said.

The People's Liberation Army (PLA) Eastern Theatre Command, which oversees Taiwan, said on Monday it would continue drills in waters near Taiwan island, focusing on anti-submarine and air-to-ship strikes, state-run Global Times reported.

The PLA conducted joint drills involving all wings of its armed forces in six areas around the island from August 4 to 7.

China is apprehensive that Pelosi's visit will open floodgates for similar visits by world leaders, especially from Japan and the European Union (EU), undermining the credibility of its claims over the island whose majority population prefers to remain independent.