Although officials have been denying it for months, the PLA appears set to cut a third of its troops in the coming years according to the respected publication Jane's Defence Weekly.
In its 'annual defence report', Jane's said that amid international concerns over the 'China threat', Beijing had sent out mixed messages about its military intentions this year.
The report highlighted the parade to mark the 60th anniversary of the founding of the People's Republic on October 1, which saw more than 50 advanced weapons put on display.
'Alongside the parade, the PLA revealed that it was considering major reductions in personnel as part of long-term plans to modernise and professionalise the armed force. Up to 700,000 of the PLA's 2.185 million force could be cut over the next few years,' it said.
The cuts were likely to be made in the PLA's land force, one of its four divisions.
Jane's did not say where it got the information from, but the report would be in line with rumours floated earlier. In August, unofficial websites said the PLA would cut 700,000 troops but the Defence Ministry denied this was the case.
The report said Beijing's decision to dispatch a PLA naval contingent to help patrol Somali waters where piracy is rampant 'was another significant gesture that appeared open to interpretation'.
'More fretful onlookers saw it as a move towards China's potentially destabilising acquisition of a blue-water fleet,' the report said.
China last year expressed an interest in building an aircraft carrier - a major technological milestone for any military. As evidence that the PLA was indeed moving in that direction, Jane's pointed to new facilities at Shanghai's Jiangnan Shipyard at Changxing Island and negotiations with Russia to purchase carrier-capable fighter aircraft.
The report said Taiwan 'was still the prime focus' of the PLA, and referred to Beijing's move to buy four Ukrainian Zubr-class heavy assault hovercraft, which are ideal for a land assault.
In February, US Secretary of State Hillary Rodham Clinton reassured Taiwan of US support, agreeing to transfer 12 refurbished Lockheed Martin P-3C Orion maritime patrol aircraft to Taiwan by 2013, it said.
The report stressed that Beijing had tried to restore its military ties with the United States in March after they were suspended late last year over arms sales to Taiwan. This led to a high-level US team holding talks with the PLA in June.
'The meeting offered hope that the recurrent friction over US Navy surveillance activities near or inside Chinese waters would not be allowed to escalate into anything more dangerous than the ill-tempered, but essentially harmless,' the report said.
It said Beijing's positive and leading role in six-party negotiations over North Korea's nuclear programme had heartened foreign counterparts, winning trust from Asian countries such as Singapore, to take part in joint military drills in June.
Meanwhile, with many top PLA leaders soon to reach the official retirement age of 65, including General Ge Zhenfeng, deputy chief of the army's general staff, and three top leaders in the general political department, a massive personnel reshuffling would be announced as soon as next week, mainland media reported.