The Pentagon's annual study on China's military power issued Tuesday said it has already matched or outstripped the US military in several areas of defence.

It added that the People's Liberation Army aims to be ready to win any conflict with the US over self-ruled Taiwan, which Beijing considers part of its territory.

China's defence ministry called the report "utterly wrong" and a misinterpretation of Beijing's "defence policy and military strategy".

The report "defamed China's military modernisation, defence expenditure, nuclear policy and other issues", the ministry said in a statement.

The two superpowers are locked in a broad power struggle sweeping in trade, technology, defence and political influence.

Beijing said the report was the latest example of US scaremongering to justify its own military spending -- the highest in the world.

"China has always pursued a defensive national defence policy and everyone knows that China is a builder of world peace," foreign ministry spokeswoman Hua Chunying told reporters on Wednesday.

The Pentagon report said China is determined to project its power eastward into the Pacific beyond Taiwan and to squeeze the United States out of the region.

China has in turn blamed Washington, which has military bases across the Pacific, for rising tensions in Asia.

Tensions between the two superpowers have simmered over the South China Sea in recent weeks, where China asserts territorial claims disputed by neighbours including Vietnam, the Philippines, Malaysia, and Taiwan.

The Pentagon said last month that Chinese drills involving ballistic missile launches in the sea threatened regional security.

Beijing, meanwhile, has blasted the "tyrannical" blacklisting by Washington of two dozen state-owned Chinese companies involved in building China's regional bases.