China made impressive gains last year in its military buildup that pushed the Communist Party-controlled People’s Liberation Army closer to matching modern militaries, according to the Pentagon’s annual report toCongress made public Wednesday.

“Militarily, China’s sustained modernization program is paying visible dividends,” the report says. “During 2010, China made strides toward fielding an operational anti-ship ballistic missile, continued work on its aircraft carrier program, and finalized the prototype of its first stealth aircraft.”

The report cautions that the Chinese military continues to lack key military capabilities, is equipped with large amounts of outdated hardware, and lacks operational experience. But the report concludes that the army “is steadily closing the technological gap with modern armed forces.”

By the end of this decade, China will be able to project military power and sustain a modest-sized force of naval and ground forces for smaller conflicts “far from China.” That assessment was not included in earlier annual reports to Congress.

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