As China continues rapidly modernizing its military, the country’s leaders are still largely focusing their efforts on Taiwan, according to a Pentagon report released on Wednesday.

The annual report comes amid a year of technological leaps for the Chinese, with the unveiling of a refurbished Soviet-built aircraft carrier, the launching of a record number of objects into space and news that a stealth fighter called the J-20 is under development.

Many of these improvements have been made, the report said, in an effort “to deter Taiwan independence and influence Taiwan to settle the dispute on Beijing’s terms.” Although relations between China and Taiwan have improved, the Pentagon concluded that “the balance of cross-Strait military forces and capabilities continues to shift in the mainland’s favor.”

The assessment noted China’s recent focus on expanding its naval power, which could be deployed to deter U.S. involvement in cross-strait conflicts.

China is expanding its submarine and warship fleets and attempting the technologically daunting feat of developing a long-range missile that could strike U.S. aircraft carriers.

Although China’s first aircraft carrier — which made its debut this month during its initial sea trials — has attracted much attention, the Pentagon played down its immediate impact. Even with the new ship, China is believed to be years away from having a fully operational carrier group that would be able to launch and land fighter jets from a ship.

But the retrofitted former Soviet carrier, called the Varyag, is considered a first step in China’s plan to build a future fleet of carriers. The Varyag “will likely serve initially as a training-and-evaluation platform,” the report says. And this year, China may begin construction of a wholly Chinese constructed carrier, “which could achieve operational capability after 2015.”

Although the annual reports often have focused on China’s rapidly increasing hardware capabilities, this year’s report notes China’s developing ability in cyberwarfare.

During the past year, several computer systems, including those owned by the U.S. government, have been targeted, the report notes, and “some of which appear to have originated within the PRC.”

Although the apparent goal of those infiltrations was to steal information, the report warns, “the accesses and skills required for these intrusions are similar to those necessary to conduct computer network attacks.”