An annual Pentagon report on China on Monday said Beijing's lack of transparency posed risks to stability, voicing concern over how it would use expanding military power.

China was developing missiles capable of striking aircraft carriers and other warships at sea, has tested an anti-satellite weapon and fielded new intercontinental ballistic missiles, the report said.

"Much uncertainty surrounds China's future course, in particular in the area of its expanding military power and how that power might be used," it added.

The report said the international community has limited knowledge of the motivations, decision-making and key capabilities that supports China's military modernization.

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"The lack of transparency in China's military and security affairs poses risks to stability by increasing the potential for misunderstanding and miscalculation," it said.

"This situation will naturally lead to hedging against the unknown," it said.

It said preparations for contingencies in the Taiwan Strait, including the possibility of US intervention in a crisis, was driving its military modernization effort over the near term.

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