Beijing's military is gearing up to challenge US operations in the Pacific and "making steady but uneven progress on capabilities it would use in an attempt to seize Taiwan," it assessed.

But, it said, the Chinese leadership would seek to reduce tensions with the United States as it seeks to "protects its core interests, and buy time to strengthen its position."

China was more "cautious" than Russia, Iran and North Korea -- other key US adversaries -- about appearing "too aggressive and disruptive."

And it said that the autocratic style of President Xi Jinping -- China's most powerful leader since Mao Zedong -- was affecting its ability to respond to challenges.

"Xi's focus on security and stability... and securing other leaders' personal loyalty to him is undermining China's ability to solve complex domestic problems and will impede Beijing's global leverage," the report found.

Beijing called the report "biased" and accused it of "exaggerating the China threat" on Wednesday.

"The US publishes these kinds of irresponsible and biased reports year after year," Chinese foreign ministry spokesman Guo Jiakun told a regular press briefing.

"We have no intention of surpassing anyone or replacing anyone", he said.

US Director of National Intelligence Tulsi Gabbard told a Senate hearing Tuesday that "China is our most capable strategic competitor" based on current intelligence.

In addition to China, the assessment analyzed threats to the United States posed by Russia, North Korea, Iran and "non-state transnational criminals," including Mexican drug cartels and Islamic extremist groups.

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