"China is building strategic relationships along the sea lanes from the Middle East to the South China Sea in ways that suggest defensive and offensive positioning to protect China's energy interests, but also to serve broad security objectives," said the report, sponsored by the director of Net Assessment, who heads Mr. Rumsfeld's office on future-oriented strategies.

The "string of pearls" strategy, as the report calls China's move, includes a new naval base under construction at the Pakistani port of Gwadar, naval bases in Myanmar, a military agreement with Cambodia, strengthening ties with Bangladesh and an ambitious plan under consideration to build a 20-billion-dollar canal in Thailand to bypass the Strait of Malacca.

The activity has raised concerns at the Pentagon that China's military build-up, which is taking place faster than earlier estimates, is aimed to project force and undermine US and regional security.

The report said China, by militarily controlling oil shipping sea lanes, could threaten ships, "thereby creating a climate of uncertainty about the safety of all ships on the high seas."

"China... is looking not only to build a blue-water navy to control the sea lanes, but also to develop undersea mines and missile capabilities to deter the potential disruption of its energy supplies from potential threats, including the US Navy, especially in the case of a conflict with Taiwan," said the report produced by defense contractor Booz Allen Hamilton.

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