China is preparing for conflict 'in every direction', the defence minister said on Wednesday in remarks that threaten to overshadow a visit to Beijing by his US counterpart next month.

A US Navy commander, Admiral Robert Willard, told Japan's Asahi Shimbun newspaper this week that he believes the Chinese anti-ship missile, the Dong Feng 21, has already achieved "initial operational capability", although it would require years of testing.

Analysts remain divided over whether China is initiating an Asian arms race. Even allowing for undeclared spending, China's annual defence budget is still less than one-sixth of America's $663bn a year, or less than half the US figure when expressed as a percentage of GDP.

However in a speech earlier this year Mr Gates warned that China's new weapons, including its carrier-killing missile, "threaten America's primary way to project power and help allies in the Pacific", underscoring the difficulties that lie ahead as China and the US seek to contain growing strategic frictions.

As China modernises, Mr Liang pledged that its armed forces would also increasingly use homegrown Chinese technology, which analysts say still lags behind Western technology even as China races to catch up.

"The modernisation of the Chinese military cannot depend on others, and cannot be bought," Mr Liang added, "In the next five years, our economy and society will develop faster, boosting comprehensive national power. We will take the opportunity and speed up modernisation of the military."