China simulated precision strikes against key targets on Taiwan and its surrounding waters and practiced sealing off the island state during the second and third day of "military drills".
The United States deployed a naval destroyer into Beijing-claimed waters in a show of force in response.
The drills – which Beijing has called a "stern warning" to the self-governing island – are reportedly a response to Taiwan's president visiting the US last week.
One of China's two aircraft carriers also "participated in today's exercise," the military said in a statement.
Taiwan said about 70 Chinese aircraft flew around the island yesterday. The three-day operation dubbed “Joint Sword”, which kicked off on Saturday, is intended to rehearse an encirclement of Taiwan
The United States, which had repeatedly called for China to show restraint, sent the guided-missile destroyer the USS Milius through contested parts of the South China Sea.
"This freedom of navigation operation upheld the rights, freedoms, and lawful uses of the sea," the US Navy said in a statement.
China and Taiwan split at the end of a civil war in 1949. China views democratic Taiwan as part of its territory and has vowed to reclaim it one day.