China is increasingly focused on naval power and has invested in hi-tech weaponry that will extend its reach in the Pacific and beyond, the Pentagon said on Wednesday.
The advances mean China will by 2020 close a technological gap that once left it lagging far behind major powers, the Defense Department said in a report.
China has ramped up efforts to produce anti-ship missiles that could knock out aircraft carriers, improved targeting radar, expanded its fleet of nuclear-powered submarines and warships and made advances in satellite technology and cyber warfare, the Pentagon wrote in a report to Congress.
The weapons buildup comes as the Asian economic giant places a growing priority on securing strategic shipping lanes and mineral-rich areas in the South China Sea.
"The evolution of China's economic and geostrategic interests has fundamentally altered Beijing's view of maritime power," said the document, an annual report on China's military.
While Chinese leaders continue to prepare for a potential conflict with Taiwan, they now see a broader role for the People's Liberation Army, with the navy as a crucial element, it said.
"China's leaders have offered unambiguous guidance that the PLA Navy will play a growing role in protecting China's far-flung interests," the report said.
US commanders worry that China's advances could jeopardize America's longstanding military dominance in the Pacific, while US officials have accused Beijing of aggressive tactics against neighboring countries over territorial disputes in the South China Sea.
An expanded Chinese naval presence in the region would have "implications for regional rivalries and power dynamics," Michael Schiffer, deputy assistant secretary of defense, told reporters.
Chinese leaders have insisted its modernization program is aimed solely at "self-defense" and accused US officials of trying to portray the armed forces as a threat.
Beijing has downplayed the advances, pointing out it was in fact last to get an aircraft carrier platform compared to the five permanent members of the United Nations Security Council.
The Pentagon also said China had sought to strengthen its nuclear forces by adding more "road-mobile" ballistic missiles and by stressing "camouflage" tactics to ensure the atomic arsenal could better survive a potential attack, the report said.
The buildup includes a new aircraft carrier that recently held its first sea trial. But the Pentagon played down its importance, saying the ship was a first step towards a future fleet of carriers expected to be built over 10 years.
The new carrier, a Ukrainian ship modified by the Chinese, "will serve initially as a training and evaluation platform, and eventually offer a limited operational capability," it said.
The aircraft carrier still has no warplanes on board and "it will take a number of additional years for an air group to achieve the sort of minimal level of combat capability," Schiffer said.
If China begins building its own aircraft carrier this year, it would not be operational until 2015, the report said.
With an array of new weapons coming on line, China's military will face a challenge in the coming decade as it tries to train troops in new tactics and revise its approach to "adopt modern operational concepts," he said.
The report noted an internal debate in China about the role of the military and whether the PLA "should develop to advance China's interests beyond traditional requirements."
It renewed US warnings that China was extending its military edge over Taiwan, citing better artillery that could strike targets within or even across the Taiwan Strait.
China considers Taiwan, where the mainland's defeated nationalists fled in 1949, to be a province awaiting reunification, by force if necessary.
The dispute over Taiwan, including US arms sales to Taipei, has remained a stumbling block to Washington's attempts at promoting a security dialogue with the Chinese military.
Taiwan, and some US lawmakers, have called for the sale of F-16 fighter jets to help counter the Chinese threat.
The Pentagon report covered 2010 and was delayed for five months, following a high-profile visit to Beijing by the US military's top officer in July.
The document estimated China's overall military-related spending was more than $160 billion in 2010.
Chinese military spending, however, is still far below the US defense budget, the world's largest, which was nearly 700 billion dollars in 2010.