Jiang Yu said the report overstates the power of China's Armed Forces and its military spending, "continues to spread the theory of the 'Chinese threat,' seriously violates the basic principles of international relations, and constitutes gross interference in China's internal affairs."
"China is a peace-loving state. It follows a peaceful path of development and conducts a defensive military policy," she said.
The U.S. Defense Department report said China's military buildup is aimed against Taiwan and its possible incorporation into China by force. According to the Pentagon, China's military spending in 2007 will be $85-125 billion.
However, according to official Chinese statistics released in March, the country will spend about $45 billion on its defense needs in 2007.
The diplomat said her government's position is that Taiwan is an inseparable part of China.
The Chinese leadership said in March it is ready to resume negotiations with Taiwan if Taiwanese authorities recognize the "one China" principle.
"We confirm our intention to resume dialogue and negotiations between the two shores of the Taiwan Strait, however, the Taiwanese authorities need to accept the 'one China' principle," President Hu Jintao said.
He said the main obstacle to improving relations between continental China and Taiwan is the refusal by "the Taiwanese authorities to accept the 'one China' principle and recognition of the 1992 agreements."