China's growing military might has altered the balance of power in the Asia-Pacific region, the Pentagon said in an annual report Tuesday. The report discusses various developments in China over the last year and notes that the developments are incremental and do not mark drastic changes. China's official defence budget for 2006 was reported at US$35 billion but observers say it is likely two to three times that amount. The Defense Department said China is more likely than any other nation to compete militarily with the US. The annual report is considered a barometer of military relations between China and the US.