“The goal here is not containment, it’s not a new Cold War,” Mr Sullivan said in an interview to CNN on Sunday.
“It is rather a favourable disposition in which the US and its allies can shape the international rules of the road on the sorts of issues that are fundamentally going to matter to the people of our country and to the people everywhere,” he added.
The objective of the Biden administration was not to seek any political transformation in China, but to shape the international order to favour its interests and other likeminded democracies, he pointed out.
Mr Sullivan’s remarks come a week after president Joe Biden said US was not seeking “physical conflict” with China, despite rising tensions.
“This is competition. It does not have to be conflict. There is no reason there need be conflict,” Mr Biden had said.
“But I’ve also indicated to him ... that we expect him to play by the rules of the road,” Mr Biden had added, referring to his conversations with Chinese president Xi Jingping.
Mr Sullivan also noted that the goal of the US policy on China was to have the two major powers operate in an international system and not repeat “errors of previous approaches.”
“We want the terms of that coexistence in the international system to be favourable to American interests and values. To be set up so that the rules of the road reflect an open, fair, free Indo-Pacific region, an open, fair, free international economic system and where basic values and norms that are enshrined in the universal declaration of human rights are respected in international institutions,” he said.
“This will be a competition as we go forward. The Chinese government does have a different approach to many of these issues,” Mr Sullivan added.
Tensions have been simmering between the countries in recent months over China’s rapid military build up.
While the US does not have any official diplomatic ties with China, it supplies arms to Taiwan.
Taiwan and China split after a civil war in 1949. The US cut off formal diplomatic relations with Taipei in 1979 in order to recognise Beijing.
Mr Sullivan said the US continued to adhere to the Taiwan Relations Act, which seeks to define relations between the US and Taiwan, as well as the One-China policy.
He added that the US has been “concerned about Chinese activities that have shaken to a certain extent the security and stability” in the region.
“But fundamentally what we are looking for is maintenance of peace and stability and maintenance of the status quo.”
Mr Sullivan’s remarks suggested that the US’s change in strategy comes from China’s continued success and political confidence, said an article in China’s state-run Global Times newspaper.
“As China will continue to maintain its willpower and momentum of growth, the US’s ambitions to encircle and suffocate China will be dismantled, and China’s strong development will help continue the country’s strategic initiative,” the article said.
China has not yet issued a formal statement on the remarks.