The report also detailed Beijing's drive to acquire modern warships, aircraft and missiles in what appeared to be part of a longer-term strategy to deny US forces access to the region.
But Zhang, the most senior Chinese official ever to attend the annual forum, described the report as "unreliable," and emphasised the defensive nature of the build-up.
He said China's military budget, which increased by 17.8 per cent to $44.9bn this year, was considered small for the size of the country.
The money would not all be spent on upgrading military equipment, with some used to raise soldiers' salaries, buy new uniforms and build military schools, he said.
In a sign that Sino-American military relations are improving, Zhang told delegates that the two powers were preparing to set up a defence hotline, something Washington has sought for years.
Zhang said the issue of a hotline between the Chinese military and the US defence department would be settled when he visited the US in September.
Gates, in a speech to the Singapore conference earlier on Saturday, downplayed past US rhetoric on China's military might, alluding only in passing to the recent Pentagon report.
While cautioning that "distrust and secrecy can lead to miscalculation and unnecessary confrontation", Gates said the US and China shared interests in areas such as terrorism and energy security.
"As we gain experience in dealing with each other, relationships can be forged that will build trust over time," he said.
Gates called for a more detailed military dialogue with China to avoid future miscalculations.