The Chinese Foreign Ministry suggested that the Pentagon's report exaggerated China's military capabilities to justify higher U.S. defense spending and lend encouragement to Beijing's political rival, Taiwan.
"The U.S. Defense Department in this report exaggerated China's military strength and spending out of ulterior motives and continued to spread the 'China threat theory,"' Foreign Ministry spokeswoman Jiang Yu said in a statement on the agency's Web site.
The unusually sharply worded statement said China is a "peace-loving country" and defended its military buildup as the prerogative of any sovereign country to protect its national security and territory.
The Pentagon report, an annual assessment of Chinese military capabilities, said the People's Liberation Army has been acquiring better missiles, submarines and aircraft. It called on China to more fully explain the purpose of a military buildup to assuage concerns among some governments that it is a threat.
Beijing has worked carefully over the past decade to play down security concerns among Asian neighbors over China's growing strength. Meanwhile it has persisted in boosting military spending, chiefly to acquire capabilities to intimidate Taiwan - which broke off from China in a civil war - into unification and ward off any U.S. intervention should a conflict arise.
The Foreign Ministry statement called on the United States to desist from sending any "wrong signals" to independence forces on the rival island of Taiwan.
The Pentagon report said that despite Beijing's massive military buildup, it lacked the power for a successful attack against the island.
China does not yet have "the military capability to accomplish with confidence its political objectives on the island, particularly when confronted with the prospect of U.S. intervention," it said.
China announced in March it would boost military spending by 17.8 percent in 2007 to 350.92 billion yuan (US$44.94 billion; EUR34.14 billion), the biggest jump in more than a decade. But the Pentagon report estimated that real spending was two to three times higher.