An annual Pentagon report on China on Monday said Beijing's lack of transparency posed risks to stability, voicing concern over how it would use its expanding military power.

China is developing cruise and ballistic missiles capable of striking aircraft carriers and other warships at sea, tested an anti-satellite weapon last year and fielded new intercontinental ballistic missiles, the report said.

The report also cited another growing source of concern -- numerous cyber intrusions into US and other computer networks around the world over the past year, apparently from within China.

"I think the biggest thing for people to be concerned about, really, is the fact that we don't have that kind of strategic understanding of the Chinese intentions," said David Sedney, deputy assistant defense secretary for East Asian affairs.

"And that leads to uncertainty. That leads to a readiness to hedge against the possibility that China's development will go in ways that the Chinese right now say it won't," he said.

The assessment comes despite some progress in US-Chinese military relations, including an agreement last week to open a telephone hotline between their defense establishments and to engage in dialogue on nuclear strategy.

The Pentagon estimated China's total military spending in 2007 at between 97 and 139 billion dollars, more than double China's declared budget of 45 billion dollars, which rose by 17.8 percent in 2007 over the previous year.

The report said China's military modernization was being driven in the near-term by preparations for contingencies in the Taiwan Strait, including the possibility of US intervention in a crisis.

"However, analysis of China's military acquisitions and strategic thinking suggests Beijing is also developing capabilities for use in other contingencies such as conflict over resources or disputed territories," it said.

Foreign weapons, high rates of investment in defense and science and technology industries, and far-reaching reforms of its military have stepped up the pace and scope of China's military modernization, the report said.

"China's expanding and improving military capabilities are changing East Asian military balances; improvements in China's strategic capabilities have implications beyond the Asia-Pacific region," the report said.

Among other things, the report said China is developing "counterspace" capabilities to prevent potential adversaries from using space-based assets in a crisis.

As examples, it cited China's use of a ballistic missile to destroy a low orbiting weather satellite in a January 2007 test, as well as civilian space programs with military applications.

In discussing China's cyberwarfare capability, the report said numerous intrusions into computer networks around the world, including US government computer networks, appear to have originated from within China.

"Although it is unclear if these intrusions were conducted by, or with the endorsement of, the PLA (army) or other elements of the PRC (Chinese) government, developing capabilities for cyberwarfare is consistent with authoritative PLA writings on this subject," the report said.

While no classified information was known to have been taken, said Sedney, intrusions into unclassified networks can yield valuable information.

"There's a whole range of scientific and technological material that is available through people in the contracting world and elsewhere that just isn't classified that can be the subject of these intrusions," he said.

The report said China has the most active cruise and ballistic missile program in the world.

It is acquiring large numbers of highly accurate ground- and sea-launched cruise missiles and deploying short-range ballistic missiles opposite Taiwan at a rate of 100 missiles a year, according to the report.

China is also developing a variant of the CSS-5 medium range ballistic missile with a range of 1,500 kilometers (930 miles) to give the military the capability to strike ships "from great distances," the report said.

Although the situation in the Taiwan Strait remains stable, the balance of military power continues to shift in China's favor, the report warned.

As of November, China had between 990 and 1,070 short range ballistic missiles deployed to garrisons opposite Taiwan, and it has 490 combat aircraft within un-refueled operational range of the island, the report said.

Agence France-Presse - 3/4/2008