Defence force chief Angus Campbell said Australia didn't condemn any country for shoring up its own national security.
But such a large-scale increase should come with transparency and assurances to the international community.
"There has been some critique of an absence of transparency and of assurance to the region with regard to the scale and intent of that build-up," the general told a Senate hearing on Tuesday.
China's military now commands the world's largest navy with about 355 ships and 58 submarines, up from 210 at the turn of the century.
It is expected to grow to 440 by 2030.
"It's not the most powerful or most capable but it is a very consequential force, and it is continuing to grow," General Campbell said.
China also has the world's third-largest air force with more than 2000 aircraft, including the latest fifth-generation fighters.
Beijing has also compiled 1250 ballistic missile systems, which include highly advanced hypersonic missiles.
In space, it has expanded its capability from 16 satellites which can be used for military purposes to over 300.
General Campbell said there had been a significant change in the "technological sophistication" of China's ability across land, air, sea, space and cyber over the past two decades.
Defence department secretary Greg Moriarty said talks between Australian and Chinese officials in March had been used to express the government's views about the build-up and its consequences for regional and national security.
He said the defence force had to move quickly to shore itself up against "the largest military build-up ever seen in the Indo-Pacific".
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