Story Highlights• Beijing modernizing force, strategy, according to report to Congress
• Development "will increase Beijing's options for military coercion," report says
• Army gaining capability to fight high-tech adversaries
• Successful missile tests of particular concern, Pentagon says
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(CNN) -- China's modernizing military will make it a more muscular player in world events, a U.S. Defense Department report says.
China's developing capabilities "will increase Beijing's options for military coercion to press diplomatic advantage, advance interests or resolve disputes," the Pentagon says in its annual report to Congress on China.
The Pentagon says that Beijing remains preoccupied with military contingencies in the Taiwan Strait -- but adds that the Chinese military is also improving its ability to win possible conflicts over resources or territory. (Watch how China has become a modern, high-tech adversary )
To that end, the report says, the Chinese army is transforming itself from a force designed to fight wars of attrition on its own territory to one capable of winning short but intense campaigns against high-tech adversaries.
It says China's military expansion is in part designed to protect its access to raw materials around the world, especially coal and oil supplies. At present, the report says, "China can neither protect its foreign energy supplies, nor the routes on which they travel."
The report notes key developments such as China's testing of an antisatellite missile in January and the greater accuracy and range of its missile forces, including intercontinental ballistic missiles.
"New air- and ground-launched cruise missiles that could perform nuclear missions will similarly improve the survivability and flexibility of China's nuclear forces," it adds.
It also says that China continues to modernize its Navy with better air-defense systems and new submarines, while its offensive air power has been improved with the acquisition of Su-30 strike aircraft and F-10 fighters.
Military spending continues to grow more quickly than the expansion of the economy, with Beijing announcing an increase of nearly 18 percent in its defense budget in March.
Looking at the situation with Taiwan, the report says the balance of forces continues to shift in the mainland's favor, with military exercises and deployments contributing to an atmosphere of intimidation. The report adds that tension could also increase as Taiwan prepares for its next presidential election, planned for March 2008.
Despite the pace of modernization, the report says, the People's Liberation Army remains untested in modern warfare and most of China's leaders lack military experience.
That gives rise to a greater potential for miscalculations, according to the report, which "would be equally catastrophic whether based on advice from operationally inexperienced commanders or from 'scientific' combat models."