Taiwan's defence spending this year will focus on preparing weapons and equipment for a "total blockade" by China, including parts for F-16 fighters and replenishing weapons, the military said in a report.
China, which views Taiwan as its own territory, staged war games around the island in August, firing missiles over Taipei and declaring no-fly and no-sail zones in a simulation of how it would seek to cut Taiwan off in a war.
In a report seeking parliamentary budget approval, a copy of which was reviewed by Reuters on Monday, Taiwan's defence ministry said it began reviewing its strategic fuel reserves and repair abilities last year, but did not give details.
In "anticipation of a total blockade of the Taiwan Strait", spending this year would include replenishment of artillery and rocket stocks, and parts for F-16 fighters "to strengthen combat continuity", the ministry said.
In an update on its threat assessment from China, the ministry said China's military has been conducting joint force operations with an eye to controlling strategic choke points and denying access to foreign forces.
"Recently, the Communist military's exercise and training model has been adjusted from a single military type to joint operations of land, sea, air and rocket forces," it said in the report, issued ahead of Defence Minister Chiu Kuo-cheng's taking lawmakers' questions in parliament on Wednesday.
"It is adopting an actual war approach and shifting from training to combat preparation."
China's Taiwan Affairs Office did not immediately respond to a request for comment.
China has never renounced the use of force to bring Taiwan under its control.
Chinese President Xi Jinping said on Monday that China must modernise its military to make it a "Great Wall of Steel".
Xi also said that when it came to Taiwan, China must oppose pro-independence and secessionist activities and the interference of external forces.
Taiwan's defence ministry said China has systematically increased the strength of its "joint combat readiness" actions around Taiwan.
China's military's Eastern Theatre Command last year sent more than 1,700 aircraft into Taiwan's air defence identification zone. That is more than double the number from a year earlier and poses a "substantial threat" to Taiwan's defence, the ministry said.
China has been "normalising" no-navigation zones around the Bohai Sea, the Yellow Sea and the Taiwan Strait, the ministry added.
China hopes to hone its abilities to fight into the "second island chain", which includes an area from Japan to the Pacific islands, to "choke and control" the Bashi Channel, the Miyako Strait and Tsushima Strait, it said, three waterways crucial to access to the Pacific and East China Seas.
The ministry said China has also continued to use "grey zone" tactics to test Taiwan's response, including sending drones, balloons and fishing boats to areas close to Taiwan.
The ministry also said it would include prioritise funding in the budget this year for major US-made weapons, including Stinger anti-aircraft missiles, and M142 High Mobility Artillery Rocket System (HIMARS) mobile rocket launchers.