The 85-page white paper outlined a list of security threats, including nuclear issues on the Korean peninsula and Japan's proposed constitutional changes but its main thrust was on strained relations with Taiwan.

The document, the fifth on national defence since 1995, described Taiwan relations as "grim" and made clear any attempt at independence would be harshly dealt with.

"Should the Taiwan authorities go so far as to make a reckless attempt that constitutes a major incident of Taiwan independence the Chinese people and armed forces will resolutely and thoroughly crush it at any cost," it said.

"The Taiwan authorities under (President) Chen Shui-bian have recklessly challenged the status quo ... and markedly escalated the Taiwan independence activities designed to split China."

The document said it was the "sacred responsibility" of the Chinese army to stop Taiwan independence forces from splitting the country.

It accused Chen and his Democratic Progressive Party of inciting anti-China sentiment and slammed the United States for selling arms to the island.

"(The United States) continues to increase, quantitatively and qualitatively, its arms sales to Taiwan, sending a wrong signal to the Taiwan authorities," it said.

"The US action does not serve a stable situation across the Taiwan Straits."

The policy paper came as China's legislature deliberated a proposed anti-secession law aimed at preventing Taiwan from declaring formal independence.

Beijing said hostilities could be ended if Taiwan, which it sees as part of its territory even though it broke with the mainland in 1949 after a civil war, accepted it was part of China and stopped its "separatist activities."

The document said defence expenditure increased to 211.7 billion yuanbillion dollars) in 2004 from 170.8 billion yuan in 2002 and 190.8 billion yuan in 2003.

Hong Kong-based military analyst Ma Ding-shing said the fact that China was openly claiming that its military expenditure has been growing at such a rate indicated it was keen to prove its military might to Taiwan.

"It could mean that it is putting pressure on Taiwan in reaction to its 600 billion Taiwan dollars military budget," Ma said.

In a move that angered China, Taiwan's cabinet approved in June a special budget of 610.8 billion Taiwan dollars (18.2 billion US) to purchase sophisticated weaponry from Washington over a 15-year period starting in 2005.

"Together with the secession law, it is using rhetoric and the military threat against Taiwan," he said.

The document also stressed that China harboured no ambition to expand its territory and reiterated it would reduce the People's Liberation Army by 200,000 troops to 2.3 million by the end of 2005.

"China will never go for expansion nor will it ever seek hegemony," it said.

Meanwhile, it repeated China's policy of not supporting, encouraging or assisting other countries to develop weapons of mass destruction and its opposition to their proliferation.

As well as Taiwan, the paper listed the impasse over North Korea's nuclear drive as a key major regional security worry.

"The foundation of the six-party talks is not solid enough as uncertain factors linger in the settlement of the nuclear issues on the Korean peninsula," it said of the stalled negotiations that also include the United States, Japan, South Korea and Russia.

It also sees Japan's proposed constitutional changes as a threat as they would allow the Japanese military to use force in international missions.

President Hu replaced retired Jiang Zemin as head of China's military in September.