Just what does it mean for you when you say china may challenge US military might? It all lies in the mission, the purpose of military. I don't know about future, but right now china is concentrating on home defense and limited power projection over its immediate neighbours, mainly taiwan. US on the other hand has a different mission for its armed forces - projection of force all over the world, being able to fight few wars at once.
Taking that into account, it would be safe to say that china wont be able to catch up with US world power projection capability in a long, long, long time. Save for some catastrophy in the US. On the other hand, if we're talking about a war in immediate neighborhood of china or even strikes on china itself - china is already a strong opponent, even today.
While US forces are bigger and better, there is just no way to put them all to work at once, attacking china. Which is why allies in that region would be important but the geography can often dicatate politics in such a case and it's unlikely than any other country than japan would truly stand on US side unless already attacked by china. Of course, japan alone has a mighty force which is quite capable of defening its mainland from chinese attack.
But lets not compare china to US. lets compare china with china. In last 15 years the advances made in all of the services have been monumental. Biggest advances, however, have been made in doctrine. Leaving the massive attack cold war philosophy of the 50s and 60s, chinese have fully accepted the information age warfare, of knowing what and where your enemies are, networking your own forces and doing precise strikes instead of massed waves. Problem is - the equipment just isnt there in enough numbers for such doctrine to be used exclusively and fully. Greater spending for military which has ben going on for more than a decade and isn't showing signs of slowing down is going to take care of that, with all of the chinese forces being fully dedicated to networked information age warfare by 2020. Certain services like PLAAF and SAM/AA networks will get there sooner.
PLA equipment inventory is just so huge that is unrealistic to expect that older items will be replaced any time soon. What is happening, however, is modernization of older systems like putting new sights and comm equipment on old tanks as well as gun launched guided missiles. Basically, while a good deal of tank and artillery pieces may still be old even in 2010 or 2015 they will use modern aiming systems with guided munitions, with the vehicles networked for greater efficiency. Relatively small number of helicopters for a force of PLA's size is currently one of biggest shortcomings, that will take at least a decade to remedy.
PLAN seems to know what it wants and is sticking to it. blue water power projection is not its mission. Building and running such huge fleet is just too expensive for china right now. But the technology for it is getting there. Dedicated AAW ships are being introduced, plenty of ASuW resources are already there but with a rather large hole in the ASW role which, again, will take at least a decade to get patched up. Submarine force is already the strongest dieselsub force in the world, good for littoral defensive warfare. deep sea offensive strikes are, however, still far away, with new nuclear subs only being tested and it'll again be decade till any sensible force will be available.
PLAAF seems to be going through quickest change, and rightly so, as its been clear for decades now just how decisive air superiority can be. J11 is ongoing production, j10 too, jh7 and h6 for PLANAF are being produced. Older planes like j8 and j7, if deemed suitable, are modernized with uptodate avionics and weapons. Biggest issues of the past are being adressed as we speak - AWACS fleet is being built up, turbofan engines are finally getting produced (for decades a weak spot of chinese engineering) tankers getting introduced, albeit in not great numbers, even with the russian il-78s. 5th gen fighter development has been underway for years and depending on when first flight is made - could be anything from 2010 to 2020, it will truly usher PLAAF into the era of technological near parity with anything else offered out there. I say near parity as its obvious that as long as US is spending several times more money on R&D than anyone else, actual parity will never be reached.
Oh, and j10 sure does have potential to have greater capabilities than su27. It really depends on the version though. if we comapre the original su27, its already vastly superior, with only range being on sukhoi's side. Of course with all the new versions, su35, j11b and what not - the line of who's better keeps constantly changing. In the end, with equal level tech applied, j10 will always be limited by its smaller size when it comes to range and payload, radar and other avionics space. Its design, however, is inherently somewhat better for dogfights at higher altitudes.
ockets of exellance are starting to pop up all over its equipment is up to date and once its t-99s go into large batch production it will have a very good MBT,certainly enough to handle reginal crisis or one in tibet