The question of who owns the oil-rich Sabah state resurfaced with the recent deportation of its Filipino residents.
The United States accuses China of militarising the South China Sea and trying to intimidate Asian neighbors who might want to exploit its extensive oil and gas reserves.
"Today China is increasingly authoritarian at home, and more aggressive in its hostility to freedom everywhere else," Pompeo said in a California speech.
China slammed the US move, which came one day after the unveiling of a US indictment targeting two Chinese nationals for allegedly hacking hundreds of companies worldwide and seeking to steal virus vaccine research.
US says Chinese claims to offshore resources across most of the contentious sea are "completely unlawful". Beijing says Washington is trying to sow discord.
There is growing anger in the Philippines after a Chinese vessel seemingly rammed a fishing boat in the South China Sea and left its crew to fend for themselves.
The United States is set to withdraw from the INF treaty on February 2, which could lower the threshold for accidental nuclear war, particularly with China in the mix.
In a statement, Chinese air force says bombers landed in the disputed territory as part of an exercise in preparation for “the West Pacific and the battle for the South China Sea”.
Although the move has been hailed by both sides as progress, critics say the protocol won't stop Chinese expansion in the region.
China's President Xi Jinping and Japan's Prime Minister Shinzo Abe reaffirm commitment to a denuclearized Korean Peninsula in separate calls with US President Donald Trump ahead of the G20 summit in Germany on July 7.
The USS Stethem destroyer passed less than 12 nautical miles (22 kilometres) from tiny Triton Island in the Paracel Islands archipelago, which is also claimed by Taiwan and Vietnam, according to a US defense department official.
The USS Dewey destroyer sailed less than 12 nautical miles from a reef claimed by Beijing, which warned the US risked disrupting negotiations between stakeholders in the South China Sea.
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