China has said it plans to step up the modernisation of its armed forces, expanding the military's global reach, but at the same time calling on the incoming US administration to improve military relations between the two countries.

A government policy report, released on Tuesday, said China's overall security situation had improved but that China's armed forces needed to improve to protect Chinese economic interests around the world.

Looking further to the future, the report said China needed to be prepared for conflicts brought about by increased competition for energy and food.

But the white paper also pointed to three major threats it said China faces now - from separatist movements in Tibet and Xinjiang; and from US arms sale to Taiwan, the self-ruled island which Beijing regards as Chinese territory.

It said the three issues "pose threats to China's unity and security".

'No compromise'

"On this issue, there can be no compromise and no concessions," Hu Changming, a spokesman for the China's defence ministry, said at a news conference in Beijing called to unveil the report.

In a statement, Hu also called on the incoming US president, Barack Obama, to "improve and promote military-to-military relations".

"We call on the US to remove the obstacles to the growth of military relations between the two countries and to create favourable conditions for the healthy growth of military relations," he said.

In recent years the US has been increasingly critical of China's growing military expenditure, saying China needs to be more transparent in its aims to avoid triggering an arms race.

China's test two years ago of an anti-satellite weapon caused particular alarm in Washington, when a land-based missile was used to destroy an obsolete Chinese weather satellite.

The test – which was not confirmed by Beijing until two weeks later – unnerved the US military which relies heavily on satellites to manage its global communications networks.

Arms trade

China considers long-time rival Taiwan as one its major security threats [AFP]

Last year China's defence minister demanded that Washington cancel a $6.5bn arms deal with Taiwan that included the sale of advanced Patriot III missiles and Apache helicopters.

In protest at the sale, China cancelled some senior-level visits and other military exchanges.

Tuesday's white paper did not give announce any new spending figures for China's 2.3 million-strong armed forces for the coming year, although analysts expect it to follow recent trends of substantial year-on-year increases.

Last year China announced a military budget of $59bn, a rise of nearly 18 per cent over the previous year and the eighteenth year of double digit increases.

That has allowed China's military to significantly modernise its equipment and capabilities, adding cutting-edge fighter jets, missiles, submarines and warships to its inventory.