China’s rapid military modernization “has the potential to reduce core U.S. military technological advantages,” the Pentagon said in its annual report on that nation’s military strategy.

One example cited in the report is China’s “extraordinarily rapid” development of its conventionally armed missile capabilities. China has been fielding a variant of its DF-21 medium-range ballistic missile with a maneuverable warhead that has the capability to attack aircraft carriers in the western Pacific, the report said.

China is “investing in capabilities designed to defeat adversary power projection and counter third-party —- including U.S. -- intervention during a crisis or conflict,” according to the report, which was released on Friday in Washington.

These capabilities include anti-satellite weapons, offensive cyber-operations and electronic-warfare capabilities meant to deny adversaries the advantages of modern warfare, according to the report.

Although China seeks to “avoid direct confrontation with the United States in order to focus on domestic development and smooth China’s rise,” its leaders in 2014 demonstrated “a willingness to tolerate a higher level of regional tension,” the report said. This included territorial claims in the East China Sea and South China Sea.

Island Disputes

The report includes a “special topics” section highlighting China’s land reclamation at five of its outposts in the Spratly Islands, the South China Sea archipelago claimed by both China and its neighbors. It has expanded from 500 acres reclaimed as of December to more than 2,000 acres today, according to a defense official who briefed reporters on condition of anonymity.

“The ultimate purpose of the expansion projects remains unclear, and the Chinese government has stated these projects are mainly for improving the living conditions of those stationed on islands,” according to the report.

Outside analysts think China “is attempting to change the facts on the ground” against Japan “by improving its defense infrastructure in the South China Sea,” the Defense Department report said.

Missile Capability

The findings may be used by the Pentagon and its allies in making the Defense Department’s budget requests to Congress. The report codified what top Defense Department officials have been saying about the risk to the U.S. military technological edge posed by automatic budget cuts as China continues to improve its capabilities.

The officially disclosed Chinese military budget grew at an average of 9.5 percent per year, adjusted for inflation, from 2005 through 2014, according to the report, although some analysts have said the spending has been considerably more.

China’s military modernization plan “includes the development of capabilities to attack, at very long ranges, adversary forces that might deploy or operate within the western Pacific in the air, maritime, space, electromagnetic, and information domains,” according to the report.

“As recently as ten years ago, several hundred short-range ballistic missiles could range targets in Taiwan, but China had only a rudimentary capability to strike many other locations within or beyond the first island chain, such as U.S. bases in Okinawa or Guam,” it said.

Attack Sub

Today, China is fielding an array of conventionally armed ballistic missiles, “as well as ground- and air-launched” cruise missiles, special operations, and cyberwarfare capabilities to hold targets at risk throughout the region.

U.S. bases in Japan are in range of a growing number of Chinese medium-range ballistic missiles, as well as a variety of ground-launched cruise missiles. The U.S. Territory of Guam, home to American Army, Air Force and Navy bases, “could also possibly be targeted by air-launched” cruise missiles, the report said.

The Pentagon said that over the next decade, China may construct a new “Type 095” nuclear-powered, guided-missile attack submarine that would improve its ability to attack surface warships, “but might also provide it with a more clandestine, land-attack option.”

In airpower, China is the only nation other than the U.S. to have two concurrent stealth fighter programs, the J-20, which conducted two prototype flight tests last year, and the J-31, which debuted in November at China’s 10th International Aviation and Aerospace Exhibition.

The Pentagon said it’s “unclear if the J-31 is being developed” for its military “or as an export platform to compete with the U.S. F-35 on the arms market.”

China’s advancing aviation and aerospace industry is of growing concern, with increasing access to foreign technology from developed countries that transfer critical dual-use technologies to China, the report said.

Examples of such critical technologies include: materials such as carbon fiber and radar-absorbent material, multi-axis machine tools, avionics, data fusion and integration technologies, and engine/flight controls.