That's a priority of the Obama administration's diplomatic and military rebalance to Asia after a decade of war in Afghanistan and Iraq.
The commission said it welcomes the policy, but added: "There is growing concern among U.S. allies and partners that the Department of Defense will be unable to follow through on its commitment to the rebalance due to declining defense budget and continuing security challenges elsewhere."
The panel also recommended that the U.S. improve air and maritime capabilities of allies in the region.
Last year, the Chinese Foreign Ministry accused the commission of "indulging in Cold War mentality." Beijing says it has no offensive intent, and says Washington of trying to contain it.
The U.S. far outstrips China in military spending, but in Asia faces a greater burden in fielding forces far from its own shores.
Rep. Howard McKeon, a Republican and chairman of the House Armed Services Committee, voiced concern that at a time when the U.S. military faces budget cuts, China's military spending is increasing and its leaders want to increase combat readiness.
"Its current pace of military modernization shows that Beijing is developing the ability to project power and influence further abroad," McKeon told a committee hearing Wednesday examining the commission's report.
Democratic Rep. Adam Smith said while the U.S. should carefully monitor military developments in China, an adversarial relationship between the two powers is not inevitable.
"There is no reason that we should have China as an enemy. We should certainly look for ways to work together," Smith said.
The report's assessment of China's naval capabilities draws on information from think tanks and U.S. naval intelligence. It said China is known to be building seven classes of vessels, including nuclear and diesel submarines, destroyers and other warships. It expects the naval modernization to continue for the "forseeable future."
China's is also advancing its capabilities in space, which is viewed as critical because of the use of communication satellites for intelligence and modern warfare.
For the first time, there are public indications China may be developing the ability to target satellites at the high altitude used by the U.S. global positioning system and many military and intelligence satellites, according to the report.
But China described a May suborbital rocket launch it conducted as part of a high-altitude scientific experiment.
