China's evolving space development should be closely watched for its potential impact on the country's military buildup, a Japanese Defense Ministry think tank report said Thursday.

"It is likely that China will continue to actively engage in space development in the years ahead, given that such development serves as a vital means of achieving military competitiveness against the United States...and raising national prestige," the report compiled by the ministry's National Institute for Defense Studies said.

The East Asian Strategic Review 2008 said, "The organizations involved in China's space development program share strong ties with the People's Liberation Army and a large proportion of the satellites launched and operated by China are believed to be used for military purposes."

"Although China has consistently advocated a ban on the development of weapons in space, this (space development) may be just an attempt to put a check on the United States."

China recognizes that the transfer of space technology is "an effective tool in diplomacy" to help secure natural resources and energy, the annual report said.

It also referred to a plan by China to build an aircraft carrier by 2010 as the most closely watched topic related to procurement of equipment by the Chinese navy.

The plan could be delayed "depending on economic situations" given the huge sums involved in building a carrier, the report said.

The report also touched on the stalled six-nation negotiations over North Korea's nuclear ambitions, noting that uncertainties still remain over the process of denuclearization of the Korean Peninsula.

"The road toward North Korea's complete abandonment of its nuclear weapons and nuclear programs will likely be a long and winding one," although the United States has reversed its hard-line policy toward North Korea following its nuclear test in 2006, it said.

"North Korea failed to fulfill its promises to disable all its nuclear facilities and submit a complete declaration of all its nuclear programs, both of which actions were expected to be completed by the end of 2007," it said.

It also drew attention to China's "military diplomacy" drives through mutual visits of its defense officials and port calls by its military vessels and warned that Japan may be used as a tool to advance China's propaganda.

In August 2007, Chinese Defense Minister Cao Gangchuan became the first Chinese defense minister to visit Japan since 1998. In November the missile destroyer Shenzhen became the first Chinese warship to visit since the People's Republic of China was established in 1949.

The report said, however, that the events did not lead to an increase in mutual understanding and confidence-building in ways Japan had wished as China failed to dissipate Japan's lingering concern about a continued increased in China's defense budgets.

It is expected that Japan is being used for "China's propaganda of its peaceful image," the report said.