China's navy should speed up its development and prepare for warfare, President Hu Jintao has said.
He told military personnel they should "make extended preparations for warfare".
China is locked in territorial disputes with several other nations in the South China Sea. Political tension is also growing with the US, which is seeking to boost its presence in the region.
After Mr Hu's comments, the US said China was entitled to defend itself.
"Nobody's looking for a scrap here," said Pentagon spokesman Admiral John Kirby in quotes carried by the AFP news agency.
"Certainly we wouldn't begrudge any other nation the opportunity to develop naval forces."
Senior US and Chinese officials are currently holding talks on military issues.
The one-day meeting takes place every year, with the stated aim of ensuring there are no misunderstandings between the two nations.
China has recently acquired its first aircraft carrier and has been vocal about its naval ambitions.
But its military remains primarily a land-based force, and its naval capabilities are still dwarfed by the US.
Mr Hu told a meeting of military officials that the navy should "accelerate its transformation and modernisation in a sturdy way, and make extended preparations for warfare in order to make greater contributions to safeguard national security".
The word "warfare" was used in official media, but other translations used "military combat" and "military struggle".
Analysts say Mr Hu's comments are unusually blunt, and are likely to be aimed at the US and Beijing's rivals in the South China Sea.
Both the Philippines and Vietnam have repeatedly accused China of overt aggression in the region.
They are among the nations claiming sovereignty over islands in the sea in the hope that there could be oil and gas deposits there.
And US President Barack Obama announced last month that the US was boosting its presence in the region, and will base a full Marine task force in northern Australia.
Analysts say the US move is a direct challenge to China's attempts to dominate the area, and is likely to bolster US allies in the South China Sea dispute.