DOD officials expect China to increase its defense budget to $240 billion over the next decade.
One of the arguments in favor of a Space Force is that USA rivals like China appear increasingly ready to strike US targets in space if a conflict breaks out.
"Over the last three years, the [People's Liberation Army] has rapidly expanded its overwater bomber operating areas, gaining experience in critical maritime regions and likely training for strikes against USA and allied targets", the report says.
In May, China landed a long-range nuclear-capable bomber on an island in the disputed South China Sea, a move that raised tensions in the region due to a prior commitment by China not to militarize the area.
"The goal of these reforms is to create a more mobile, modular, lethal ground force capable of being the core of joint operations and able to meet Xi Jinping's directive to 'fight and win wars, '" the Pentagon report notes.
"The goal of these reforms is to create a more mobile, modular, lethal ground force capable of being the core of joint operations", it says.
In the meantime, President Donald Trump has ended joint military exercises between the United States and South Korea, a move that both China and Russian Federation have been demanding for years.
It is estimated that China spent upwards of $190 billion in 2017 on its military.
The Defense Department also warned of China's efforts to expand its air strike range in the region.
Turkey, France to act against USA sanctions
Concerns that Italy's governing parties will agree a budget with high public spending have also weighed on the single currency. Upholding a lower court's decision earlier this week , it also ruled against lifting a travel ban imposed on Brunson.
"The PLA continues to strengthen its military space capabilities despite its public stance against the militarisation of space", it said.
Last week, China's armed forces told a US Navy reconnaissance plane to "leave immediately" on six separates occasions today during a tense flight over the South China Sea.
The report, which comes as the USA and China spar over trade negotiations, said China increased its global defense spending to more than $190 billion in 2017, according to Reuters.
Chinese Foreign Ministry spokeswoman Hua Chunying said: "By playing up the so-called China's militarisation in the South China Sea, certain people in the United States are staging a farce of a thief crying "stop thief".
China sees Taiwan as a renegade province, while the USA backs its independence.
The Pentagon suspects that China might be training for strikes against U.S. targets as well as sending a message to other regional actors that Chinese capabilities are improving.
"The PLA also is likely preparing for a contingency to unify Taiwan with China by force, while simultaneously deterring, delaying, or denying any third-party intervention on Taiwan's behalf", it states.
Chinese foreign ministry officials have claimed the USA is "running amok" in the region.
"Should the United States intervene, China would try to delay effective intervention and seek victory in a high-intensity, limited war of short duration", the report says.
The US has sounded yet another warning about China's expansionist designs and coercive tactics to smother opposition from rival claimants on territorial issues, pointedly referring to the Doklam troop face-off among other such incidents, even as the Chinese defence minister is set to visit India next week.