According to U.S. officials, Trump is also mulling a 50 percent draw down in Afghanistan - another momentous move that has left lawmakers and global allies fearing for what comes next.
Shanahan attended Trump's cabinet meeting on Wednesday afternoon, the president's first of 2019.
In one of his first meetings of the day, Shanahan told civilian leaders of the United States military to focus on "China, China, China", even as America fights militants in Syria and Afghanistan, a USA defense official said.
His new role will see him dealing with China and the planned withdrawal of USA troops from Syria.
On his first full day on the job, acting Secretary of Defense Patrick Shanahan told senior leaders at the Pentagon on Wednesday to "remember China, China, China", a U.S. defense official told CNN.
US President Donald Trump and First Lady Melania Trump greet members of the US military during an unannounced trip to Al Asad Air Base in Iraq on December 26, 2018.
Cesc Fabregas Is Arsenal Legend, Not Chelsea Legend - Former Premier League Star
Fabregas joined Chelsea in June 2014 in a €33million transfer from Barcelona and has won two Premier League titles with the club. Hudson-Odoi has also been heavily linked with a move away from Stamford Bridge, with Bayern Munich reportedly interested.
Other officials have described Shanahan as an advocate of the Pentagon's toughening stance toward Beijing.
As acting secretary, Shanahan, 56, has all the authority of a permanent secretary.
By focusing on China as opposed to operations in Syria or Afghanistan, Shanahan is possibly seeking an issue where Trump's views more closely reflect those espoused by the Pentagon's National Defense Strategy.
Shanahan, best known for his focus on internal Pentagon reform and his private-sector experience, had spent three decades at Boeing and was general manager for the 787 Dreamliner passenger jet before he joined the Pentagon.
Trump similarly has criticized China on an economic and geopolitical level, but maintains he shares a warm relationship with President Xi Jinping.
A spokesman for Shanahan said the acting secretary "has recused himself for the duration of his service" at the Defense Department "from participating in matters in which the Boeing Company is a party", reports Defense News.
At his confirmation hearing to be deputy, the late senator John McCain said a lack of detail in some of Shanahan's foreign policy answers was "almost insulting", and he expressed concerns that putting a former defense executive in the Pentagon could be akin to putting a fox "back in to the henhouse".