This would also work together with a ground-based early warning network to find threatening asteroids.
China wants to carry out a "crewed mission" to the Moon in the next five years, and in that period, it will continue to focus on exploring the poles of the satellite.
This is also reportedly not sitting well with NASA officials, who have expressed fears that China has ulterior motives.
"We must be very worried that China is going to land on the Moon and say: now it is ours, and you stay out," NASA director Bill Nelson said earlier this month.
The Chinese government didn't take Nelson's sentiments too well, noting that the accusations pose "a great threat" to the peaceful use of space.
The country also argued that its space exploration is always for searching for legitimate technology, social, scientific, technological objectives and much more.
"The system will have the ability to intercept incoming asteroids from all directions and can form a defense circle approximately twice the distance between the Moon and Earth," said Wu Weiren, the chief designer of the Lunar Exploration Program of China, in a report published in the journal Scientia Sinica Informationis.
China also has plans to work alongside Russia to build its own lunar base together by 2035.