Mattis' comments drew a pointed reaction from a Chinese official at the meeting.
Also he said that the comments made by US Defence Secretary James Mattis, are and attemp to interfere in the internal affairs of China.
He added there would be "consequences" if China does "not find the way to work more collaboratively with all of the nations who have interest".
"We do not see it as a militarisation by going through what has traditionally been an global water space", said Mattis of the USA ship movements through the South China Sea.
U.S. Secretary of Defence Jim Mattis speaks at the IISS Shangri-la Dialogue in Singapore June 2, 2018.
But China has drawn increasing ire for the militarization of its islands, and the U.S. recently disinvited the PLA Navy from an worldwide military exercise because of Beijing's "continued militarization of disputed features in the South China Sea" which "only serve to raise tensions and destabilize the region".
Mattis specifically called out Beijing's militarization of artificial islands in the South China Sea, home to some of the world's busiest sea lanes.
China's construction of military facilities and deployment of defense systems on disputed islands in the South China Sea in recent months caused concerns from countries in the region.
"The placement of these weapon systems is tied directly to military use for the goal of intimidation and coercion", Mattis said, adding, "China's militarization of the Spratlys is also in direct contradiction to President Xi Jinping's 2015 public assurances in the White House Rose Garden that they would not do this".
He added the acts contradicted Chinese President Xi Jinping's 2015 remarks that there was "no intention to militarise" the Spratly Islands.
"If the USA will continue to pursue a constructive results-oriented relationship with China, cooperation, whenever possible, will be the name of the game, and competing vigorously where we must".
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Last week the US withdrew an invitation for Beijing to participate the exercise known as Rim of the Pacific.
Vietnam is the most active challengers to China's sweeping claims to much of the South China Sea, with Hanoi claiming the Paracels and the Spratlys in their entirety.
On Sunday, two U.S. warships sailed close to the Paracel Islands in a long-planned operation created to challenge China's claims.
Despite He's admission, he batted back Mattis' accusations, saying that the "close-up reconnaissance" carried out by two USA warships - which sailed within 12 nautical miles of the Paracel Islands last week - was the real "source of militarisation" in the region.
South Korea and Japan have expressed concern that Trump may put USA security interests ahead of theirs in pursuing a deal with North Korea. Washington had called on Beijing to remove these systems, AP reported.
China has not sent high-level officials to the Shangri-La conference.
The Pentagon is weighing a more assertive programme of the so-called freedom-of-navigation operations close to Chinese installations on disputed reefs, two United States officials and Western and Asian diplomats close to the discussions said.
Mattis emphasized that the USA military wants more transparency from China.
The United States criticised the move and vowed to continue working to insure that the Indo-Pacific region remain "free and open".
Mattis said: "We are focussed on modernizing our alliance with both Republic of Korea and Japan, transforming these critical alliances to meet the challenges of the 21st-century".