Aside from aiming for technological parity with the United States, the People's Liberation Army is also focused on conducting joint operations, to be able to deter or defeat any US effort to intervene on Taiwan's behalf, the report said.

It said that PLA has already matched or surpassed the United States military in several areas, including shipbuilding, land-based ballistic and cruise missiles, and air defense systems.

And in its first public estimate of China's nuclear capacity, the annual report said the country has warheads numbering "in the low 200s" in its nuclear stockpile, much less than the 300 or more estimated by independent analysts.

That number is expected to double over 10 years. China can already launch nuclear weapons by ballistic missile from land and sea, and is developing the capacity to do develop an air-launched ballistic missile as well, the report said.

"It is likely that Beijing will seek to develop a military by mid-century that is equal to -- or in some cases superior to -- the US military, or that of any other great power that the PRC views as a threat," the report said.

If China achieves that goal and the United States fails to address it, the report said, it "will have serious implications for US national interests and the security of the international rules-based order."