The report highlights its increasing military capability, including defence spending estimated at $190bn (£150bn) - a third that of the US.
As indicated by the "Military and Security Developments Involving the People's Republic of China 2018" report, China boasts 75 to 100 intercontinental ballistic missiles, 16 to 30 intermediate-range ballistic missiles, 200 to 300 medium-range ballistic missiles, and 1,000 to 2,000 short-ranged ballistic missiles, amounting to approximately 2,000 missiles.
China's military has expanded its bomber operations in recent years while "likely training for strikes" against the United States and its allies, a Pentagon report released on Thursday has said.
"Over the last three years, the People's Liberation Army (PLA) has rapidly expanded its overwater bomber operating areas, gaining experience in critical maritime regions and likely training for strikes against USA and allied targets".
China, it says, is restructuring its ground forces to "fight and win".
In addition, to the ire of regional neighbours, China has built a series of islets and ocean features into military facilities in the South China Sea.
Activities around Taiwan and in the East and South China Sea are also alarming given Beijing's contested interests in these areas.
Last week, China's armed forces told a US Navy reconnaissance plane to "leave immediately" on six separates occasions today during a tense flight over the South China Sea.
The Pentagon report also sounded a warning over China's plans to introduce floating nuclear power plants on disputed islands and reefs in the South China Sea.
The Pentagon report said that despite a projected slowdown in economic growth, China's official defence budget would be more than $240bn by 2028.
The document also warns that China "is likely preparing for a contingency to unify Taiwan with China by force".
In a nod to China, the United States cut formal ties with Taiwan in 1979 but continues to maintain close political and security ties, which irks Beijing.
The report comes at a precarious time in U.S.
The US also continues to maintain a substantial military presence in Japan, which has its own territorial disputes with China and the Philippines.
What is being done to defuse tensions?
This year's report reiterates that China will seek to establish new bases in such countries.
The report, which is mandated by Congress, details Chinese military developments over the previous year.
Despite tensions, in June, James Mattis became the first U.S. defence secretary to visit China since 2014.