"In the coming years, instability on the Korean Peninsula could produce a regional crisis involving China's military," it said in an annual report to Congress, titled "Military and Security Developments Involving the People's Republic of China 2014."
The 87-page report highlighted potential threats from China's continued investment in its military.
The Pentagon noted China's official defense budget jumped 5.7 percent to US$119.5 billion in 2013 from a year earlier, while South Korea increased its military spending to $31 billion from $29.2 billion in 2012.
"China has prioritized land-based ballistic and cruise missile programs to extend its strike warfare capabilities further from its borders," read the report. "It is developing and testing several news classes and variants of offensive missiles, forming additional missile units, upgrading older missile systems, and developing methods to counter ballistic missile defense."
The Pentagon also warned of China's growing ability to conduct more sophisticated attacks using electronic devices and cyberspace.
In this year's report, the Pentagon also made it clear that its military operations in the region won't be affected by Beijing's unilateral establishment of its own air defense and identification zone (ADIZ) in November.
"The United States neither accepts nor recognizes China's requirements for operating in the newly declared ADIZ," it said.
In this year's report, meanwhile, the Pentagon dropped the case of North Korea's torpedo attack on a South Korean warship in 2010.
It said in the previous version that Beijing's "actions to shield North Korea from the international response to its sinking of the South Korean naval vessel, Cheonan," is one of prominent examples of its assertive behaviors that generate regional concerns about its intentions. (Yonhap)