Estimates of the size of China's ICBM arsenal have not changed in 20 years. Reports usually state that they have only 10-20 liquid-fueled missiles capable of reaching the US (albeit now MIRVed with miniaturized warheads similar to the W88 - how similar is a controversial question). However, China's capacity for production of ICBMs and warheads (one can extrapolate from their satellite launch and nuclear programs) suggests that the old estimates are drastically low. Even Israel is estimated to have hundreds of warheads in its arsenal.
The General's comments may have been carefully calculated by the Chinese military in order to force US planners to consider the possibility of a nuclear strike on a US carrier group in the area (or even a strike on US bases in Okinawa or Guam) in the event of a conflict over Taiwan. Zhu sounds bloodthirsty, until we recall that MacArthur wanted to use nuclear weapons against China during the Korean war (this nuclear "blackmail" was an important impetus to Mao to push for a Chinese atomic bomb, although he never admitted it publicly) and that the French wanted the US to save their garrison at Dien Bien Phu (Vietnam) with nuclear bombs. During the cold war, NATO reserved the right to use nuclear weapons in the face of superior Soviet conventional forces.
"If the Americans draw their missiles and position-guided ammunition on to the target zone on China's territory, I think we will have to respond with nuclear weapons," the official, Maj. Gen. Zhu Chenghu, said at an official briefing.
General Zhu, considered a hawk, stressed that his comments reflected his personal views and not official policy. Beijing has long insisted that it will not initiate the use of nuclear weapons in any conflict.
...China has had atomic bombs since 1964 and currently has a small arsenal of land- and sea-based nuclear-tipped missiles that can reach the United States, according to most Western intelligence estimates. Some Pentagon officials have argued that China has been expanding the size and sophistication of its nuclear bombs and delivery systems, while others argue that Beijing has done little more than maintain a minimal but credible deterrent against a nuclear attack.
"If the Americans are determined to interfere, then we will be determined to respond," he said. "We Chinese will prepare ourselves for the destruction of all the cities east of Xian. Of course the Americans will have to be prepared that hundreds of cities will be destroyed by the Chinese."