He also likened the construction of military outposts in the South China Sea to the decision by late paramount leader Deng Xiaoping to send a PLA garrison to Hong Kong after the 1997 handover, in a show of the country's sovereignty in the region.
Mattis stood on the United States' Indo-Pacific strategy.
"They believe that piling mountainous debts on their neighbours and somehow removing the freedom of political action is the way to engage them".
Mattis's comments appeared to be an attempt to reaffirm the US commitment to Asia's security, even as President Donald Trump's decisions to levy tariffs on allies and withdraw from worldwide agreements raise questions about America's postwar alliances.
But in a quick pivot, he said the US welcomes cooperation with China "wherever possible", and announced that he has accepted Beijing's invitation to visit there soon.
Philippines Secretary of Defense Delfin Lorenzana meets with U.S. Secretary of Defense Jim Mattis on the sidelines of the IISS Shangri-la Dialogue in Singapore June 2, 2018.
Mattis also struck at one of the key, longstanding disputes between the USA and China, telling the conference that America will continue to provide defense equipment and services to Taiwan and oppose any effort to alter the status quo.
Mattis responded by saying there was a "fundamental disconnect" between China's views on the waters and how global tribunals view them.
"If the diplomats can do their work, if we can reduce the threat, if we can restore confidence building measures with something verifiable, then of course these kinds of issues can come up subsequently between two sovereign democracies, the Republic of Korea and the United States", Mattis said.
The United States has long demanded that North Korea give up its nuclear weapons.
The U.S. canceled China's participation in the multinational RIMPAC naval drills after China confirmed reports the People's Liberation Army had installed missile systems on reclaimed reefs in the disputed Spratly chain.
He also blasted Chinese President Xi Jinping for reneging on a 2015 promise made at the White House that Beijing would not militarise the island features in the South China Sea. "Eventually these things do not pay off, even if on the financial ledger sheet, or the power ledger sheet they appear to".
The U.S. response to China's weaponization of the islands continued on Sunday, as two U.S. warships sailed close to the Paracel Islands, which lie north of the Spratlys.
Instead, Mattis said any discussions about US troops would be between Seoul and Washington.
"Our objective remains the complete, verifiable, and irreversible denuclearisation of the Korean peninsula".
He said the USA "will continue to pursue a constructive, results-oriented relationship with China, cooperation when possible, and competing vigorously where we must".