South Korean Defence Minister Song Young-moo also told the Shangri-La Dialogue security summit that USA forces in South Korea was a "separate issue from North Korea's nuclear issue".
Taiwan and China, which are hundreds of miles to the north, also claim some of the islands.
"Despite China's claims to the contrary, the placement of these weapon systems is tied directly to military use for the purposes of intimidation and coercion", Mattis said, according to Bloomberg News.
The comments came on the heels of a string of events that highlight tension between the world's two biggest economies over the South China Sea's disputed waters.
Mattis' address in Singapore was the second time he had attended the summit since becoming Pentagon chief.
"Make no mistake, America is in the Indo-Pacific to stay".
Mattis' comments triggered an equally pointed reaction from a Chinese official at the meeting.
"Any irresponsible comments from other countries can not be accepted", Lieutenant General He Lei said at the Shangri-La Dialogue in Singapore.
But the message might be a tougher sell for Mattis, who is generally popular on the worldwide scene, after his boss this week imposed metals tariffs on some of America's closest allies in the name of "national security".
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Still, Mattis was asked a question after his speech by a Chinese delegate.
"The United States seems to think that it can antagonize partners in certain areas, whilst expecting cooperation in others", she told AFP.
Mr Mattis said the United States is willing to work with China on a "results- oriented" relationship, but Beijing's actions in the South China Sea were coercive and the Pentagon would "compete vigorously" if needed.
"China's policy in the South China Sea stands in stark contrast to the openness that our strategy promotes, it calls into question China's broader goals", said Mr Mattis, who said he would be travelling to Beijing this month. China had participated in these exercises in 2014 and 2016. Mattis characterized this action as an "initial response".
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".
"They believe that piling mountainous debts on their neighbors and somehow removing the freedom of political action is the way to engage them".
"These things fly over the Sea of Japan, they even fly over northern Japan".
During a question and answer session afterward, Mattis fielded a question from a Chinese colonel, who claimed that US freedom of navigation operations (FONOPs) are a provocation that violate worldwide law.
Mattis responded by saying there is a "fundamental disconnect" between China's views on the waters and how global tribunals view them.
Mattis said there was little doubt about Beijing's intentions.
He added that the status of USA troops in South Korea was not on the table when Mr Trump and Mr Kim meet, but left the door open to the issue being discussed down the road between Seoul and Washington if certain conditions were met. President Donald Trump on Friday said the summit will take place June 12.
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