China has announced plans to upgrade its military, highlighting its dispute with Taiwan as one of several regional security threats.
Taiwan's US arms deal has been criticised on both sides of the strait
In a defence white paper, the government said it would focus its spending on strengthening the country's naval and air forces.
But it said China would "not engage in an arms race".
Meanwhile, Taiwanese legislators have been voting on a controversial and much-delayed US arms deal package.
They agreed to send a portion of the $18bn (£9bn) deal to a budgetary committee, the Associated Press reports. From there, it must pass two more readings to become law.
The vote came after opposition parties agreed to vote with the ruling party, after blocking the deal for more than two years.
China's white paper, which runs to nearly 100 pages, looks at the military challenges facing the country, from bolstering its borders and coastal defences to upgrading its weapons.
Ruled by separate governments since end of Chinese civil war in 1949
China considers the island part of its territory
China has offered a "one country, two systems" solution, like Hong Kong
Most people in Taiwan support status quo
It singles out Taiwan as a major threat.
China sees Taiwan as part of its territory and has threatened to use force if the island ever moved to declare formal independence.
"The struggle to oppose and contain the separatist forces for Taiwan independence and their activities remains a hard one," the report says.
It also highlights the recent North Korean nuclear test as well as US support of both Taiwan and Japan as regional causes for concern.
The document, which is published every two years, says military spending in 2006 is set to reach $36bn (£18bn), up from $31bn last year - although the US believes the true figures to be much higher.
China's President Hu Jintao this week called for a more powerful navy, which would be prepared "at any time" for combat.
But the report makes clear China "will not engage in any arms race or pose a military threat to any other country.
"China is determined to remain a staunch force for global peace, security and stability".