China appears to oppose the potential deployment of a THAAD missile defense unit to South Korea because the system reduces the value of Beijing's missile inventory aimed for regional dominance, a U.S. government commission report said Wednesday.

The U.S.-China Economic and Security Review Commission made the assessment in its annual report to Congress, noting that Beijing's stated reason for its opposition to U.S. missile defense is concern about the value of China's nuclear arsenal.

However, theater missile defenses, such as THAAD (Terminal High Altitude Area Defense), "do not reduce the value of China's nuclear arsenal, the stated reason for China's general opposition to missile defense," the report said.

"Theater missile defense does, however, reduce the value of China's missile inventory in support of its regional ambitions, a more likely reason for its objections," it said.

The U.S. wants to deploy a THAAD unit to South Korea, where some 28,500 American troops are stationed, to better defend against ever-growing threats from North Korea's ballistic missile and nuclear programs.

But the issue has become one of the most sensitive for South Korea because China sees a THAAD deployment as a threat to their security interests and has increased pressure on Seoul to reject such a move, despite repeated assurances from Washington that the system poses no threat to China.

Seoul and Washington have long claimed they have never held any formal consultations on the issue.

The report also said that in the post-Cold War nuclear realm, China's chief strategic concern has been the United States, particularly the U.S. nuclear arsenal and modernization of missile defenses.

It also pointed out that China is surrounded by a number of nuclear-capable states.

"In South Asia, India and Pakistan are relatively recently-declared nuclear states with mutual deep-seated tensions.

In Northeast Asia, prospects for North Korea's denuclearization appear increasingly unlikely, while Japan's recent defense reforms have led China to raise concerns about Japan's nuclear weapons potential," the report said.

"Finally, although Taiwan does not itself maintain nuclear weapons, China recognizes that a conflict with Taiwan could involve the intervention of the nuclear-armed United States," it said. (Yonhap)