WASHINGTON (Reuters) - China is using state-sponsored industrial and economic espionage to acquire technology fueling its fast-paced military modernization program and cut its reliance on foreign arms makers, the Pentagon said on Monday.

Members of the People's Liberation Army's navy guard of honour prepare to use a string to ensure that soldiers stand in a straight line before an official welcome ceremony outside the Great Hall of the People, in Beijing April 15, 2013. REUTERS/Jason Lee

In its 83-page annual report to Congress on Chinese military developments, the U.S. Defense Department also highlighted Beijing’s efforts to develop advanced-technology stealth aircraft and to build an aircraft carrier fleet to project power further offshore.

“What concerns me is the extent to which China’s military modernization occurs in the absence of the type of openness and transparency that others are certainly asking of China,” David Helvey, deputy assistant secretary of defense for East Asia, told a Pentagon briefing on the report.

Helvey welcomed Chinese moves toward greater openness but said there were still many unanswered questions and warned of the “potential implications and consequences of that lack of transparency on the security calculations of others in the region.”

The annual China report, which Congress began requesting in 2000, comes amid tensions in the region due to China’s military assertiveness and expansive claims of sovereignty over disputed islands and shoals.

Beijing’s publicly announced defense spending has grown at an inflation-adjusted pace of nearly 10 percent annually over the past decade, but Helvey acknowledged that China’s actual outlays could be much higher.

China announced a 10.7 percent increase in military spending to $114 billion in March, the Pentagon report said. It said publicly announced defense spending for 2012 was $106 billion, but actual pending for 2012 could range between $135 billion and $215 billion. U.S. defense spending is more than double that, at more than $500 billion.

The report highlighted China’s continuing efforts to gain access to sophisticated military technology to fuel its modernization program. It cited a laundry list of methods, including “state-sponsored industrial and technical espionage to increase the level of technologies and expertise available to support military research, development and acquisition.”

“China continues to engage in activities designed to support military procurement and modernization,” the report said. “These include economic espionage, theft of trade secrets, export control violations, and technology transfer.”

China also relies on acquisitions of key dual-use components, the report said, citing a network of government-affiliated companies and research groups that help it gain access to sensitive technology.

The report referred to two people from Taiwan, for example, who were charged in the United States with trying to pass sensitive defense technology to China by photographing the technology, deleting the images, then taking them to China where the images could be recovered.