China is rapidly extending its military reach and could pose a threat across Asia, a Pentagon report warns.
The report says China's troops near Taiwan have been boosted
It says Beijing has retained its focus on Taiwan - but increased spending on aircraft, ships and missiles means it could project power further afield.
The Pentagon has issued warnings about China's growing might in recent years.
The Chinese have responded to past reports by saying they pose no threat and accusing the US of seeking excuses to sell weapons to Taiwan.
China regards the island as a renegade province and has vowed to invade if Taiwan moves towards declaring formal independence.
Last year's Pentagon report said China has deployed up to 730 short-range ballistic missiles in the three provinces facing Taiwan.
According to the latest document, China has increased by about 25,000 the number of ground troops deployed in the area.
"The pace and scope of China's military build-up already place regional military balances at risk," the 58-page report said.
It added: "Current trends in China's military modernisation could provide China with a force capable of prosecuting a range of military operations in Asia... potentially posing a credible threat to modern militaries operating in the region."
The Pentagon warns that European Union plans to scrap an arms embargo the EU has maintained since the 1989 Tiananmen massacre could provide China with new weapons systems.
There are no responses from China so far, but Beijing has criticised similar studies in the past, accusing Washington of engaging in militaristic rhetoric.