China's J-10 fighter jets perform during an air show, the 11th China International Aviation and Aerospace Exhibition in Zhuhai, Guangdong Province, China Nov. 1, 2016. Reuters

Chinese President Xi Jinping said Beijing needs a smaller army that has the structure and combat capability to succeed in modern warfare. China has the world's largest military and second largest military budget after the United States, but Xi plans to reduce its force by 300,000 soldiers, or some 13 percent, and focus on combat effectiveness, Reuters reported Saturday.

"This is a major, inevitable change," Xi, chairman of the country's Central Military Commission, said during a military reform conference last week. "We must seize the opportunity and make breakthroughs."

China has flexed its military muscles in recent years during disputes with the U.S. and its neighbors over control of the East and South China Seas, both important shipping routes. Xi's latest remarks on China's military strength comes days after Beijing held a flight test of 10 ballistic missiles in November in what state media called a "display of force."

Xi, however, said modern warfare depends on information and technology, not just manpower. China's ambitious modernization efforts includes aircraft carriers and anti-satellite missiles.

"There have been new changes in terms of the military's size, structure and formation, which features smaller in size, more capable in strength, modularization and multi-functionality, with scientific factors playing bigger roles," Xi said.

China's massive army of 2.3 million active service members and 1.1 million reserves has long been a major global force, even when Beijing has opted for fewer soldiers. The People's Liberation Army had more than 3 million in active service in 1992. In contrast, the U.S. military has about 1.4 million active service members.

"China is building a modern and regionally powerful military with a limited but growing capability for conducting operations away from China’s immediate periphery. The question of how the United States should respond to China’s military modernization effort is a central issue in U.S. defense planning and foreign policy. Congress’ decisions on this issue could affect U.S. defense strategy, budgets, plans, and programs, and the U.S. defense industrial base,"a congressional report from March states.