He said the shift had become apparent in October last year when a Chinese submarine surfaced near a US carrier group in international waters off Japan.
Kelly was speaking in the Australian capital, Canberra, where he is on a visit to commemorate the 65th anniversary of the Battle of the Coral Sea in World War II.
Commenting on the expansion of Chinese naval power her said there was a heightened need for transparency between the world's navies "so we don't have a misinterpretation of something out on the high seas."
'Things to come'
Last October's submarine incident was "probably a sign of things to come" he said.
The US navy recently had a close encounter
with a Chinese submarine in the Pacific [EPA]
"As their economy continues to grow… I suspect that China is thinking that they need to have a blue water navy to protect their interests around the globe,'' Kelly told reporters.
"We have in the past maybe had more of an expectation that they would stay very close to their own territorial waters and not operate that much outside of those waters."
Of particular interest to China, he said, were sea lanes such as those that bring iron ore and natural gas from Australia and have helped China become the world's biggest economy after the United States and Japan.
"I certainly would envision them keeping an eye on those sea lanes," Kelly said.
Exchange visits between the Chinese and American militaries dropped off following the collision of a US spy plane and a Chinese fighter jet off China's coast in 2001.
However, relations have been improving recently as US leaders cautiously seek to increase contact and improve understanding of China's rapidly modernising military.