While China objects vocally to US naval operations in the South China Sea, it is eager not to be seen as a threat, and its criticism of the annual Pentagon assessment is part of a drive to avoid being perceived as attempting to seize the mantle as the region's dominant military force.
China's initiative, along with its regular naval vessel visits to foreign ports, reflect the global power's growing influence and expanding worldwide economic interests.
China is now building its first overseas base in Djibouti, which it says will help facilitate its participation in anti-piracy patrols in the Gulf of Aden and United Nations peacekeeping operations in the region. Outside of Washington, the possibility of setting up shop in Pakistan is likely to irk New Dehli as well.
The Pentagon report said that China has cited anti-piracy patrolling as one of the reasons for developing what it calls a naval logistics center in Djibouti.
While the report notes that China has not undertaken any new land reclamation projects on disputed features in the South China Sea during 2016, it did accuse China of further militarizing the contested Spratly Islands via the construction of 24 hangars capable of housing fighter aircraft, fixed weapons positions, barracks and communication facilities.
On the country's defence spending, the report said Chinese "officially-disclosed" military budget grew at an average of 8.5 per cent per year betweem 2007 and 2016, and Chinese leaders seem committed to increases in defence spending for the foreseeable future, even as China's economic growth slows.
Last year, Beijing had signed an agreement with Pakistan for the sale of eight submarines of which first four will be built in China, with the remaining four in Pakistan. It was China's first port call in South Asia by a nuclear submarine. Pakistan was singled out as an expected location and it is already the largest buyer of Chinese-made arms.
China's arms sales are conducted via state-run export organizations that seek primarily to generate profits and offset defense-related research and development costs. China has used coercive tactics, such as the use of law enforcement vessels and its maritime militia, to enforce maritime claims and advance its interests in ways that are calculated to fall below the threshold of provoking conflict, states the report.
U.S. Defense Secretary James Mattis recently criticized China's land reclamation activities in the disputed Spratly Islands, describing the activities as a demonstration of "China's disregard for global law" and its "contempt for other nations' interests".
In addition, the Defense Department noted that Beijing continued to use "low-intensity coercion" in disputes related to the East and South China Seas.
It is expected that China's defense budget is likely to increase by an annual average of 7 percent, growing to Dollars 260 billion by 2020 for a force that, although expanding, is expected over the near-term to remain primarily regional.