In step with China's ambitions, the People's Liberation Army continues to grow.

The Pentagon's annual report on Chinese military power was released Thursday. The report finds that Chinese officials remain wary of major engagements, especially with the still-dominant United States. However, contentious territorial claims, coordination with illiberal governments and a military bristling with new hardware pose a challenge to the United States. China's rise will test the substance of the Obama administration's vaunted "pivot to Asia."

The foreign policy strategy of the Chinese Communist Party has long been that of Deng Xiaoping: "Observe calmly; secure our position; cope with affairs calmly; hide our capabilities and bide our time; be good at maintaining a low profile; and never claim leadership."

According to the Pentagon, China's communist leadership still view Deng's mantra as the best way forward. Over the next several decades, they hope to achieve "national rejuvenation" by focusing on domestic development that will, in theory, cement party rule.

However, certain voices within the military and party hierarchy are calling for a more assertive strategy. Additionally, many of China's actions are at odds with the nothing-to-see-here strategy of Deng Xiaoping. The Pentagon describes this tension: "China publicly states that its rise is 'peaceful' and that it harbors no 'hegemonic' designs or aspirations for territorial expansion. However, China's lack of transparency surrounding its growing military capabilities has increased concerns in the region about China's intentions."

The PLA is the dominant regional force, and China is investing a great deal of money to ensure it is globally competitive.

Last year, China announced a 5.7 percent increase in defense spending that brings its official budget to $119.5 billion; the Pentagon estimates the real number is much higher, around $145 billion. Either figure qualifies the PLA as the second-largest military in the world. Although its budget is dwarfed by that of the United States military, the Chinese appear to be able to get more power from an equivalent amount of spending.

Some of this money is being used to develop state-of-the-art military technology. For example, China is developing new delivery methods for its intercontinental ballistic missiles. Its most advanced ICBM is the Dong Feng-41, which has been tested but not deployed and may be capable of carrying several independently targetable warheads in its payload.

The PLA is strengthening its conventional arsenal as well. It continues at-sea testing of its first aircraft carrier, purchased from Ukraine, while building one of its own design. It is undertaking an "unprecedented" modernization of its air force according to the report and is increasing investments in space and counter-space technology. Of note is the development of a space launch vehicle, the Long March-5, capable of lifting twice the current payload into orbit.

PLA ground forces are being dramatically restructured so they can be deployed quickly over long distances. The army is beginning to emphasize small groups of special operations forces instead of sheer numbers, the traditional Chinese strength.

The report details China's increasing coordination with other nations, which will help make up in influence what it lacks in firepower. The list of its recent partners should concern U.S. policymakers: three of seven bilateral military exercises it took part in were with China; another was with Pakistan. Last month, Russian President Vladimir Putin and Chinese President Xi Jinping agreed to a $400 billion energy deal, further indicating the countries' strengthening relationship -- a relationship columnist Charles Krauthammer cites as the first "global coalition against American hegemony since the fall of the Berlin Wall."

All of these achievements give China greater leverage with which to pursue its interests. Certainly it has become more assertive with neighbors over its territorial claims, although Chinese officials are quick to blame their rivals for initiating each provocation.

At issue is the ownership of small islands and reefs in the South and East China Seas. Insignificant by most measures, these islands are situated in "the beating heart of the Asia-Pacific" according to Secretary of Defense Chuck Hagel; their owner would win a strategic coup that includes valuable shipping lanes and mineral resources. China's territorial claims in the area are vast.

One of the largest disputed island groups, the Senkakus (Diaoyus in Chinese), was recently the center of controversy. In November 2013, China announced the creation of an Air Defense Identification Zone that conspicuously encompassed the Senkakus. Other provocative actions by the PLA, including the May 24 buzzing of Japanese surveillance planes by two Chinese fighters, have worsened the situation.

But regional players are not the only ones affected by China's small acts of belligerency. They test the Obama administration's "pivot to Asia" as well.

First outlined by then-Secretary of State Hillary Clinton in an article titled "America's Pacific Century," this strategy identifies the expansive Asia-Pacific region as the proper focus of U.S. policy in the next century. The eponymous pivot indicates a policy "rebalancing" from the Middle East to the Far East.

A strong China will test the security component of the pivot. As the PLA grows, its leaders will gain influence over Chinese policy, a particularly alarming possibility given the PLA's friendliness with Pyongyang.

The Pentagon states bluntly that it "will not change how the United States conducts military operations in the region." President Obama has affirmed the U.S. defense commitment to Japan, pointedly including the Senkakus, and has signed an agreement to expand U.S. naval and air access in the Philippines.

While these signs are encouraging, what matters is not the promise but the act of keeping it. Will U.S. warplanes continue to fly in noncompliance with the Chinese identification requirements? Will the U.S. military come to Japan's aid if the Chinese invade the Senkakus? Asian allies are less willing to trust the United States' word on these matters, a reality perhaps reflected in Japanese Prime Minister Shinzo Abe's decision to build up Japan's military.

Whether the pivot proves successful will depend on many factors, chief among them the approach China takes with its neighbors. If it minds its own business, then the worst the U.S. has to fear is a trade war. If China abandons the strategy of Deng and becomes aggressive, a major conflict could ensue.

The Pentagon report describes a China that is divided on strategy. While the government insists it will rise by peaceful means, the PLA's progress indicates a more forceful way forward.