China's nuclear arsenal is set to more than triple to 1,500 warheads by 2035, the Pentagon said in a Tuesday report also highlighting the increasing sophistication of the country's air force.

Washington has identified Beijing as the most consequential challenge to the United States, and the annual report on China's military emphasized improvements to both its nuclear and conventional forces.

"The Department of Defense estimates that (China's) operational nuclear warheads stockpile has surpassed 400," the report said. "If China continues the pace of its nuclear expansion, it will likely field a stockpile of about 1,500 warheads" by 2035.

That figure would still however lag far behind the arsenals of the United States and Russia, which each include several thousand nuclear warheads.

China is also working to modernize its ballistic missiles that could deliver nuclear weapons, launching some 135 in testing during 2021 -- "more than the rest of the world combined," excluding those fired in conflicts, the report said.

And Beijing's air force is making strides, "rapidly catching up to Western air forces," it said.

A senior defense official, speaking before the report's release, said the Chinese air force is "trying to... progress rapidly on all fronts," including on the equipment it operates as well as its pilots and other personnel.

The report takes aim at the way in which China is employing its military in the Indo-Pacific region, saying it has "adopted more coercive and aggressive actions."

That is especially the case around Taiwan, the self-governing democratic island Beijing claims as its own.

A visit by US House Speaker Nancy Pelosi in August infuriated China, which reacted with its largest and most aggressive exercises around the island since the 1990s.

Both sides have since moved to lower the temperature, but the senior defense official said that while Chinese military activity around Taiwan has decreased, it is still higher than before.

Beijing is "establishing kind of a new normal in terms of the level of military activity around Taiwan following the speaker's visit," the official said.

"Even though we don't see an imminent invasion, obviously, that sort of an elevated level of... intimidating and coercive activity around Taiwan" is a source of concern, the official added.