China lacks the ability to "fully" invade Taiwan as it does not have the equipment, but is bringing on line advanced new weapons and has other options to threaten Taiwan, such as inspecting foreign cargo ships, the island's defence ministry said.
China, which views democratically-governed Taiwan as its own territory, has ramped up military and political pressure over the past five years to assert its claims, which Taipei strongly rejects.
China has never renounced the use of force to bring Taiwan under its control. The government of the defeated Republic of China fled to Taiwan in 1949 after losing a civil war with Mao Zedong's communists, and no peace treaty or armistice has ever been signed.
In an annual threat assessment of China sent to lawmakers on Friday, a copy of which was reviewed by Reuters, Taiwan's defence ministry said Beijing continues to hone skills such as joint command operations.
"However, the use of tactics and strategies against Taiwan is still limited by the natural geographical environment of the Taiwan Strait and insufficient landing equipment and logistic capabilities," it said.
China "is not yet fully possessed of the formal combat capabilities for a comprehensive invasion of Taiwan".
But China is speeding up development of a slew of new weapons, such as the H-20 bomber and hypersonic missiles and beefing up the number of nuclear warheads, while trialling new tactics, the ministry said.
The report said that in May, when China staged war games around Taiwan shortly after Lai Ching-te took office as the new president, Chinese coast guard ships were sent for the first time on interception and inspection drills off the east coast.
China's aim with the drills was to practice cutting off communication with the outside world and blockade Taiwan, and boarding foreign cargo ships is an option China could take, short of open conflict, the ministry said.
The waters around Taiwan, including the Taiwan Strait, are busy international shipping lanes.
China's defence ministry did not immediately respond to a request for comment.
At a regular news briefing in Beijing on Thursday, the ministry said that as long as Taiwan's ruling Democratic Progressive Party "engages in 'Taiwan independence' (efforts), there will be no peace".
"The more they provoke, the faster they will perish," spokesperson Wu Qian told reporters.
Taiwan's proposed defence spending will rise faster than expected economic growth next year, as Taipei builds more missiles, submarines and other weapons to deter China.
President Lai, whom China calls a "separatist", has repeatedly offered talks with Beijing, but has been rebuffed. He says only Taiwan's people can decide their future.
"Peace achieved by strength is true peace," Lai told officers at the defence ministry on Friday.
"We will continue to improve our self-defence capabilities and show the world that we are united as a nation and are determined to protect our country."
