The U.S. Defense Department says China is on pace to achieve its goal of building a modern military by 2020, a move it says could potentially destabilize the Asia-Pacific region.

In its annual assessment to Congress, the Pentagon Wednesday said China is rapidly modernizing its military equipment and achieved several advances in the past year. It noted that China made a test flight of a new stealth fighter, conducted sea trials of its first aircraft carrier and made improvements in satellite technology and cyber warfare.

U.S. Deputy Assistant Secretary of Defense Michael Schiffer said Wednesday the Chinese military buildup could have a destabilizing effect on the region. He said it increases the risk of misunderstandings and miscalculations and may contribute to regional tensions and anxieties.

The report said Chinese leaders continue to prepare for a potential conflict with Taiwan, but also now see a broader role for China's military.

The Pentagon estimates that China spent more than $160 billion for its military in 2010.

China says its military buildup is for self-defense and has accused U.S. officials of trying to portray its armed forces as a threat.