Prime Minister Lee Hsien Loong described attempts by Islamic State to turn the region into a province of a world-wide Islamic caliphate as a "pie-in-the-sky dream" but warned the group could gain a territorial foothold.

'"That would pose a serious threat to the whole of south-east Asia," Mr Lee said in a speech at the Shangri-la Dialogue, Asia's premier security summit.

Mr Lee revealed that a 19-year-old student detained in Singapore last month for planning to join IS had intended to kill the country's leaders, including president Tony Tan and himself, if he could not leave the city-state for Syria.

He said the accused youth Arifil Azim Purta Norja'I had planned how he would attack key facilities and carry out the assassinations.

"The threat is no longer over there, it is here," Mr Lee said.

Mr Lee's comments on Friday were the strongest made by a regional leader on the threat posed by the radicals.

His comments came amid heightened tensions over the South China Sea dispute. US Defence Secretary Ash Carter at the dialogue on Saturday said that Beijing's island-building in the South China Sea was "out of step" with international norms and was undermining security in the Asia-Pacific

Mr Carter, speaking to top defence officials from across the Asia-Pacific, acknowledged that several countries had created outposts in the region's disputed islands, but he said the scope of China's activity was unprecedented and created uncertainty about its intentions.

US officials earlier confirmed that China had placed two motorised artillery pieces on the islands, only later to remove them.

"There should be an immediate and lasting halt to land reclamation by all claimants," Mr Carter said. "We also oppose any further militarisation of disputed features."

A Chinese military delegate at the forum, Senior Colonel Zhao Xiaozhuo of the Chinese Academy of Military Sciences, said the remarks were "groundless and not constructive" and questioned whether US measures, including military reconnaissance over the South China Sea was destabilising.

Mr Carter reiterated that the United States would continue to "fly, sail and operate where international law allows".

"We are not creating new facts, the new facts are in the South China Sea and they were not created by the US," he said.

Mr Carter struck a slightly more conciliatory tone at the dialogue compared to a speech earlier this week where he vowed the US would remain the dominant power in the region "for decades", saying Washington wanted a regional security architecture where "everyone rises".

Comments from Singapore's prime minister underscored the diversity of the region's risks.

Singapore has been calling for greater regional cooperation to combat IS and held a counter-terrorism conference last month.

Malaysia has also warned over the past few months that IS  has a plan to create a presence within its borders with the aim of establishing an Islamic state.

Mr Lee said several radical groups in the region have pledged allegiance to IS, which has recruited more than 500 Indonesians and dozens of Malaysians, who have formed their own unit called the Malay Archipelago Combat Unit.

He said that recently IS posted a propaganda and recruitment video showing Malay-speaking children training with weapons in IS-held territory.

Two Malaysians, including a 20-year-old, were identified in another IS video of a beheading of a Syrian man, he said.

Mr Lee said Malaysian police have stopped more people going to the Middle East, including soldiers.

with Reuters, AP, agencies