updated 3/4/2008 6:16:51 PM ET 2008-03-04T23:16:51

China continues its huge military buildup opposite Taiwan, further pushing the balance of power between the two rivals toward the mainland's favor, the Defense Department says in its annual report on China's military.

Although the Taiwan Strait remains stable, China is adding more than 100 missiles a year to the estimated 1,000 it has targeting the democratic, self-governing island that Beijing claims as its own, the report found. Hundreds of thousands of troops are based opposite Taiwan, it said, and hundreds of planes are ready to make good on China's threat to attack should Taiwan formalize its de facto independence.

"A potential military confrontation with Taiwan, and the prospect of U.S. military intervention, remain the PLA's most immediate military concerns," the report said, referring to the People's Liberation Army, China's military.

China was said to be deterred "on multiple levels" from invading Taiwan. The report warned that a war would lead to international sanctions, damage China's economic development, destroy relations with the United States and taint Beijing's coming Summer Olympics.

Wang Baodong, spokesman for the Chinese Embassy in Washington, said China "practices defensive policies" and pursues a "peaceful development route." He said China consistently opposes the Defense Department reports as "interference in China's internal affairs and a reflection of typical Cold War thinking."

He said Taiwan "is an integral part of the Chinese territory, and China, as a sovereign state, has the right to conduct necessary defense-building for the purposes of safeguarding national security and territorial integrity."

What role does the U.S. play?
The report comes as U.S.-Chinese military ties have been becoming warmer. Last week, China agreed to allow access to sensitive records on American servicemen missing since the 1950-53 Korean War. The two countries also agreed to set up a military hot line for communicating in emergencies.

The U.S. closely watches the Taiwan Strait and, as Taiwan's closest ally, has hinted it would go to war to protect Taiwan if nuclear-armed China should attack.

The report said China is working to contain and prevent moves by Taiwan toward independence, "rather than seeking a near-term resolution."

But the situation remains delicate. A "perceived shift in military capabilities or political will" by either side could "cause Beijing to calculate its interests, and its preferred course of action, differently," the report said.

Despite China's continued focus on preparing for a fight in the Taiwan Strait, the Defense Department noted what it saw as some positive signs.

Chinese President Hu Jintao's annual speech to the Party Congress did not emphasize military threats toward Taiwan and included an offer for talks with the island's leaders, the report noted.

Emphasis on defense spending
Taiwan has also reversed a recent trend of declining defense spending and has begun modernizing equipment and improving training, the report said.

China, though, has the "the most active ballistic missile program in the world" and had between 990 and 1,070 short-range ballistic missiles in its garrisons opposite Taiwan by November of last year, the report found.

China has nearly 500 combat aircraft able to reach Taiwan and has airfields that can handle hundreds more; about 400,000 troops were said to be based opposite Taiwan.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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