The Pentagon report comes at a time of heightened tension over maritime territories claimed by China and disputed by several Asian nations.
A US Defence Department report on China's military activities in the South China Sea has 'severely damaged' mutual trust between Beijing and Washington, Chinese Defence Ministry spokesman Yang Yujun said on Saturday.
In its annual report to Congress, the US Defence Department said on Friday that China had reclaimed more than 3,200 acres (1,300 hectares) of land in the disputed South China Sea in the space of two years.
According to the report, China had 'weaponized' the artificial lands in the Spratlys - two island chains also claimed by Taiwan, Malaysia, Philippines and Vietnam.
China is expected to add substantial military infrastructure, including communications and surveillance systems to the artificial islands, the report added.
But US Defence Department's assessment of developments in the South China Sea have drawn sharp criticism from Beijing, which has termed the report a 'deliberate distortion' of facts.
"China follows a national defence policy that is defensive in nature," Xinhua quoted Yang as saying.
"Moves such as deepening military reforms and the military build-up are aimed at maintaining sovereignty, security and territorial integrity, and guaranteeing China's peaceful development," Yang added.
Yang said the US had always been 'suspicious' and flexing its military muscle in the region by frequently sending aircraft and warships.
Despite its calls for freedom of navigation and peace, the US has pushed forward militarization of the South China Sea with an "intention to exert hegemony", Yang added.
The report comes at a time of heightened tension over maritime territories claimed by China and disputed by several Asian nations.
Washington has accused Beijing of militarising the South China Sea while Beijing, in turn, has criticised increased US naval patrols and exercises in Asia.
The Pentagon also renewed accusations against Chinese government and military for cyber attacks against US government computer systems, a charge Beijing denies.
The Pentagon said attacks in 2015 appeared focused on intelligence collection.
Why is the South China Sea important?
- More than $5 trillion worth of trade passes through the waters
- The waters hold big reserves of oil and gas underneath the seabed
- The sea provides greater access to fisheries in the region
- Location holds great strategic value
- China, Brunei, Taiwan, Malaysia, Indonesia, Vietnam and the Philippines
- UN tribunal at The Hague will rule on rival claims to South China Sea islands between May and June of this year