CHINA is spending far more than it admits on its military as part of a modernisation process that signals long-term ambitions to extend its power not only over Taiwan but also deeper into the region, according to the Pentagon.

Li Zhaoxing, the Chinese Foreign Minister, yesterday swiftly dismissed a new report, presented to the US Congress on Tuesday. “China, remember, will continue to pursue a path of peaceful development,” he said, insisting that his country posed no threat to anyone.

The report could further fuel anti-Beijing sentiment among US politicians. Congress is already restless over China’s huge trade surplus, a currency policy seen as undervaluing the yuan to give Chinese goods an unfair advantage in the marketplace and a bid by a state-controlled energy firm for Unocal, the US energy producer.

“China does not now face a direct threat from another nation. Yet it continues to invest heavily in its military, particularly in programmes designed to improve power projection,” the report said.

The Pentagon estimates that China might be spending up to $90 billion (£52 billion) a year on its military, three times the officially acknowledged budget, a figure that would make it the world’s third-biggest defence spender after the United States and Russia. The Pentagon assessment details advances in China’s arsenal of short-range ballistic missiles, with between 650 and 730 deployed opposite the island of Taiwan, and notes that Beijing is adding to them at a rate of about 100 missiles a year. The issue of Taiwan lies at the heart of Sino-American relations since Beijing has said that it will retake the island, which it sees as a renegade province, by force if necessary while the United States is committed by treaty obligations to the island’s defence.

In addition, China possesses longer-range missiles capable of striking India, Australia and most American cities and has made considerable advances in sea and air power, including its indigenous Yuan-class submarine that was launched last year and a high-tech F-10 fighter expected to be rolled out this year. “Current trends in China’s military modernisation could provide China with a force capable of prosecuting a range of military operations in Asia, well beyond Taiwan, potentially posing a credible threat to modern militaries in the area,” the report said.

However, the report also cites weaknesses and concludes that China’s ability to project conventional military power remains limited. This, and the damage to China’s image and the impact on its economic growth, acts as a deterrent to military action against Taiwan.

The military build-up underscores why the US opposes any easing of a European Union arms embargo on China.

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