"China continues to invest in military programs and weapons designed to improve power projection, anti-access area denial and operations in emerging domains such as cyberspace, space and the electromagnetic spectrum," said Abraham Denmark, deputy assistant secretary of defense for East Asia.
The report to Congress reveals that China has added over 3,200 acres to the seven sites it occupies in the South China Sea during the last two years.
On these artificial island sites, China has excavated deep channels to improve access to its outposts, created artificial harbors, dredged natural harbors and constructed new berthing areas to allow access for larger ships, according to the Pentagon's annual China Military Power report.
Each of the three largest outposts will have an airfield and each of those will have a runway approximately 9,800 feet long, the report said.
While the U.S. says that under international law these artificial islands do not provide China with any additional territorial or maritime rights within the South China Sea, the Pentagon warns that they will significantly enhance the Communist nation's long-term presence in the area.
On Saturday, Chinese Defense Ministry spokesman Yang Yujun expressed "strong dissatisfaction" and "firm opposition" to the Pentagon's report, according to the state-run Xinhua news agency.
"China follows a national defense policy that is defensive in nature. Moves such as deepening military reforms and the military buildup are aimed at maintaining sovereignty, security and territorial integrity, and guaranteeing China's peaceful development," Yang said.
Coming just days after Chinese fighter jets were scrambled in response to the U.S. Navy sending a guided missile destroyer within 12 miles of a disputed island, the report also said that China demonstrated a willingness to tolerate higher levels of tension in pursuit of its maritime sovereignty claims last year.
"China's military modernization program entered a new phase in 2015," Denmark said, and assessed that, "China's leaders seem committed to sustaining defense spending growth for the foreseeable future."
China also has made significant improvement to its weapons capabilities over the last year, the Pentagon said, modernizing its short-, medium- and intermediate-range ballistic missiles, high-performance aircraft, integrated air defense networks, information operations capabilities and amphibious and airborne assault units.
During a military parade in September 2015, China unveiled its new "Guam killer" missile, which is capable of hitting targets 3,400 miles away -- including Guam, where the U.S. has military bases -- and is raising new fears of a growing Chinese threat to major U.S. military installations and stability in the Pacific Rim.