Rahm Emanuel has been a sharp critic of China's economic and geopolitical strategies during his three years in Japan.
"The world is shrinking, consolidating, and shaping, and the United States has to respond to that," the Democrat told reporters.
"The United States is that thin blue line between autocracy, where might equals right, and rules, laws, principles and values."
Rahm, 65, described an "axis of autocrats" -- Russia along with China, Iran and North Korea, all three of whom he said had taken steps to support Moscow's war in Ukraine.
China presents itself as a neutral party in the Ukraine war, although it remains a close political and economic ally of Russia.
"The Indo-Pacific is a home game for China and an away game for the United States. With our allies, we level the playing field," he said.
Moves to boost US-Japan defence ties, and information sharing with South Korea on recent North Korean missile launches, are among examples he said showed that the "credibility of our deterrence in this region is strengthened".
"Part of the entire strategy of China is to isolate a country in this region and use their full force and power to isolate that country and limit and restrict their both sovereignty and independence," Emanuel said.
But as America and its allies display increasing "strength in numbers... then the isolated party is China".
US president-elect Donald Trump, who will be inaugurated on January 20, has named businessman George Glass as Rahm's replacement.
Rahm said he had no plans to change tack under Trump.
"I will engage, because I think whether domestically, internationally or whatever, ideas and principles are worth fighting about," he said.
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