The annual Shangri-La Dialogue - a two-day event - gathers defence ministers and top military officials from around the world.
While the forum is purely on security, the discussions are being held against a backdrop of Sino-US trade tensions and high-tech rivalry.
He credited China for its cooperation on enforcing United Nations sanctions against Pyongyang.
He said that the U.S. is willing to cooperate with China and welcomes competition, but said behavior that erodes other nations' sovereignty and sows distrust of China's intentions must end. But if Washington wanted to talk, "we will keep the door open".
However, he also said he was keen to foster a military relationship with Beijing.
Without naming any country, Shanahan referred to nations using a "toolkit of coercion" to destabilize the region, including "deploying advanced weapons systems to militarize disputed areas" and "promoting state-sponsored theft of other nations' military and civilian technology".
General Wei is expected to respond to the USA strategy in his speech today at the Shangri-La Dialogue, which has gathered ministers and defence chiefs from around the world each year since 2002. Wei is scheduled to speak Sunday, when he is expected to respond to Shanahan's remarks.
"When I look at that situation, it's too much risk".
The acting secretary of defense's speech coincided with the release of a new Indo-Pacific strategy by the DoD. "We are where we belong".
"We need you to invest in ways that take more control over your sovereignty and your own ability to exercise sovereign choices".
Beijing has warned the USA not to underestimate its resolve to protect its sovereignty, just as the acting Pentagon chief effectively accused China of undermining regional stability and urged allies to boost their defense budgets.
USA politicians said Shanahan's speech was impressive.
He said the Pentagon has requested $104 billion globally - its most ever - for research and development in the next fiscal year, and $125 billion in operational readiness.
"If these trends in these behaviors continue, artificial features in the global commons could become tollbooths. If anybody wants to separate Taiwan from China, the Chinese military will protect the country's sovereignty at all costs".
Speaking to reporters after Wei's meeting with Shanahan, Wu noted that the USA has recently "had a series of negative words and deeds" on Taiwan issues. We should welcome it, provided that everyone plays by internationally established rules.
"If anything happens in the South China Sea, the world also will suffer. We love America, we also love China".
Duterte, aiming to attract trade and investment from the Asian superpower, has mostly withheld criticism of Beijing's expansive claims to the sea - a point of regional contention because trillions of dollars of goods pass through it.
"China says, 'This is our land, this is our sea".
The announcement is the latest headwind to threaten the Hindu nationalist government led by Prime Minister Narendra Modi, who was re-elected to his second term in a landslide just weeks ago after campaigning partly on his record as an economic reformer. "Maybe with arms, '" Duterte told the 25th International Conference on the Future of Asiaforum.
"I don't see a trade war".