Whisk peanut butter, hoisin sauce, water, tomato paste, and chili sauce, if using, in small bowl.
Heat oil, garlic, and red pepper flakes in small saucepan over medium heat until fragrant, 1 to 2 minutes.
Stir in peanut butter mixture; bring to simmer, then reduce heat to medium-low and cook, stirring occasionally, until flavors blend, about 3 minutes. (Sauce should have ketchup-like consistency. To thin, add water, 1 teaspoon at a time, until proper consistency is reached.).
Transfer to bowl; cool to room temperature.
The sauce can be refrigerated in an airtight container for up to 3 days. Serve at room temperature.