China appears on track to forge a modern military by 2020, a rapid buildup that could be potentially destabilizing to the Asia-Pacific region, the Pentagon said on Wednesday.

Fueled by its booming economy, China's military growth in the past decade has exceeded most U.S. forecasts. Its aircraft carrier program, cyber warfare capabilities and anti-satellite missiles have alarmed neighbors and Washington.

"China clearly believes that it can capitalize on the global financial crisis," said Representative Howard McKeon, adding the U.S. military presence in the Pacific must not be sacrificed in an attempt to control U.S. spending.

The Defense Department's annual assessment to Congress on the Chinese military flagged all the major concerns about China's growing military might, including Beijing's widening edge over Taiwan. It also noted cyber attacks in 2010 -- including those on U.S. government computers -- that appear to have originated in China.

"We have some concerns (on cyber) about some of the things that we've seen. And we want to be able to work through that with China," said Michael Schiffer, a deputy assistant secretary of defense.

"Despite continued gaps in some key areas, large quantities of antiquated hardware and a lack of operational experience, the PLA (China's People's Liberation Army) is steadily closing the technological gap with modern armed forces," the report said.

"The pace and scope of China's sustained military investments have allowed China to pursue capabilities that we believe are potentially destabilizing to regional military balances," Schiffer said.