China is actively building up its armed forces and they would be strong enough by 2020 to launch an invasion of Taiwan, a military report said Tuesday.

Despite closer political ties China is "continuing to accumulate large-scale war capabilities, with the threat of a cross-strait military conflict continuing to exist", according to the island's 2015 National Defence Report.

The mainland's annual military spending has grown on average by double-digit rates over the past decade, second only to the United States, it said.

The biennial report published by the defence ministry said China was strengthening its naval and air forces in the region to deter foreign forces from intervening in any invasion.

"China believes foreign interference would be its biggest concern if it attacks Taiwan," it said.

China and Taiwan split at the end of a civil war in 1949.

Relations have warmed since current Taiwanese president Ma Ying-jeou of the China-friendly Kuomintang party came to power in 2008.

But China still sees Taiwan as a breakaway territory and refuses to renounce the use of force should it declare formal independence.

The defence ministry said there was a risk of Taiwan letting its guard down because of increased economic and cultural exchanges in recent years.

"Overall (China) is diversifying its Taiwan strategy, forging positive developments in the cross-strait situation, giving them an advantage for any future attacks on Taiwan," its report said.

Taiwan will elect a new president in January, with the candidate of the pro-independence opposition Democratic Progressive Party, Tsai Ing-wen, tipped to win.

She has pledged to maintain the status quo if she wins but some analysts have questioned whether cross-strait peace could be maintained.

The defence ministry report also questioned China's reported military spending, which it said was significantly understated.

The actual budget is estimated to be two to three times the reported figure, putting it on par with the US and Russia, it said.

The US is Taiwan's main ally and sells weapons to the island, a source of discontent for China.