"At the same time, we judge that China over the past several years has begun a substantially new phase in its military development by beginning to articulate roles and missions for the PLA that go well beyond China's immediate territorial interests."
Blair cited China's development of a blue-water navy that can range far afield from East Asia, highlighting its decision in December to start anti-piracy patrols in the lawless waters off Somalia.
Chinese infantry troops were also extending their international presence through a higher peacekeeping profile, and may take on combat missions beyond their current role in logistical support for the United Nations.
Blair said China's space programs, including anti-satellite weapons, "also rank among the country's highest military priorities."
Of most immediate concern to far-flung US forces in the western Pacific and Asia is China's refinement of ballistic and cruise missile capabilities, while its nuclear weapons capability will increase over the coming decade.
"China also is developing conventionally armed short- and medium-range ballistic missiles with terminally guided maneuverable warheads that could be used to attack US naval forces and airbases," Blair said.
"In addition, counter-command, control, and sensor systems, to include communications satellite jammers, are among Beijing's highest military priorities."