He said Beijing needs to provide greater transparency and reassurance as it is the "fundamental issue" for the region.
Meanwhile, the Philippines defence minister Gilberto Teodoro Jr has called China "absolutely irresponsible and reckless" in its actions in the South China Sea.
The ministers had separately addressed reporters on the sidelines of an Asian defence summit held in Singapore.
China has yet to respond to either Marles or Teodoro.
Organised by the think tank International Institute for Strategic Studies, the Shangri-la Dialogue has traditionally been anchored by the US and China, which have been jostling for power in the region.
This year China has sent a lower-level delegation and scrapped its speech. In the absence of a strong Chinese presence, the dialogue has been dominated by criticism and questions of Beijing posed by the US and its allies.
On Sunday morning, Marles asserted that "what we have seen from China is the single biggest increase in military capability and build up in conventional sense, by any country since the end of the Second World War".
It is not just the size of the military build-up that concerns other countries, he told reporters.