"Over the past three years, the army quickly expanded the operating areas, freeboard bombers, gaining experience in critical marine areas and, probably, practicing strikes against targets of the USA and its allies", the report says.
It also says that China is pursuing a nuclear capability on its long-range bombers, saying the Chinese air force "has been re-assigned a nuclear mission".
China is deploying "increasingly advance military capabilities meant to coerce Taiwan" in a bid to prevent self-governing Taiwan from declaring independence, CNN reported quoting the report as saying.
The annual report to Congress, released on Thursday (Aug 16), highlights China's growing military, economic and diplomatic clout, and how Beijing is leveraging this to rapidly build its global footprint and establish regional dominance.
China is also rapidly expanding its space program "despite its public stance against the militarization of space", according to the report.
President Xi Jinping past year ordered the PLA to step up efforts, saying China needed a military ready to "fight and win" wars.
"China continues to use maritime law enforcement ships and aircraft to patrol near the islands", the report said. Such a practice is not targeted against any particular nation near the area, but forms the part of China's bigger plan to build a strong army capable of winning a war in all weathers and territories, he said.More news: Worst flood in a century kills 43 in India's Kerala
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In addition, "China continued outreach to South China Sea claimants to further its goal of effectively controlling disputed areas", the report said. A report from the Pentagon now claims the country is "likely" training pilots for missions that would directly target the United States.
China has been escalating its military and air force presence in the region which has been raising a lot of eyebrows. The defense expenditure is expected to rise to $240 billion over 10 years.
This year's report reiterates that China will seek to establish new bases in such countries.
In regards to Taiwan, the reports warns that China "is likely preparing for a contingency to unify Taiwan with China by force".
That's according to a military report released Thursday (August 16) coming less than a day after the two sides said they would hold talks over a rising trade war.
But backed by its growing economic, diplomatic and military clout, China is increasingly willing to employ "coercive measures" to advance its interests.
Even before the new report's release, Washington was feeling the full brunt of the Chinese military's fury over a new $717 billion USA defense bill which encourages closer cooperation with Taiwan to counter Beijing.