The report suggests that the modernization of the Chinese People's Liberation Army (PLA) might allow China to conduct various military operations in Asia, expanding the scale of such operations way beyond Taiwan and, therefore, creating a potential threat to other countries in the region.
At the same time, Pentagon experts say at present China does not possess enough forces to conduct a full-scale military operation against Taiwan.
Chan said China, indeed, does not have enough large ships to ensure the transport of its land forces across the Bay of Taiwan and its troops lack the training for such an operation.
"The most the Chinese are capable of today is to conduct a missile barrage of the island and establish a sea and air blockade of Taiwan," Chan said.
According to Taiwanese authorities, China deploys 700 missiles targeted at Taiwan. Independent experts estimate the number to be much smaller, 200-300 missiles.
Chan said the rate of the PLA modernization is so high that after 2010 China might be able to conduct the most ambitious military operations.
Chan said that in 2010 Taiwan and the U.S. would face a brand-new Chinese army.