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At least 10,000 personnel took part in drills, which involved 48 naval vessels and 76 fighter jets, said the country's Defense Ministry.
China's only aircraft carrier, the Liaoning, took part in the parade with a display of J-15 fighter jets under Xi's observation.
Since coming to power in 2012, Xi has overseen considerable growth in Chinese naval power. Whereas previously the country's navy was largely defensive and confined to its immediate coastal waters, today it boasts significant "blue-water" capabilities, meaning it can project force into areas such as the Indian and Pacific oceans.
But it's the South China Sea that represents the biggest potential challenge. The Chinese government claims a huge swath of territory across the sea, overlapping with claims of the Philippines and Vietnam, among others.
The massive PLA navy drills in the South China Sea sent a clear signal to the other claimants in the region, as well as the US, Collin Koh, research fellow at the S. Rajaratnam School of International Studies' Maritime Security Program, told CNN.
"The PLA Navy is there and they're there to stay," he said.
Taiwan drills announced
In a foreshadowing of future drills, the Fujian provincial maritime authority on Thursday announced live-fire naval exercises for April 18 in the Taiwan Strait, the first Chinese naval exercise in waters off the self governing island since September 2015.
The announcement of drills in the Taiwan Strait comes after a month of growing tensions between China, Taiwan and the United States.
Taiwan has been self-governed since a bloody civil war ended in 1949. Though both Taipei and Beijing view the island as part of China, neither government recognizes the legitimacy of the opposing side, with Beijing warning that it could retake the island by force if necessary.
"Every inch of our great motherland's territory cannot be separated from China," he said, drawing loud applause from his audience inside the Great Hall of the People.
US tensions over trade
The Chinese exercises are taking place amid rising tensions between Beijing and Washington over trade, but analysts have also expected the Trump administration to harden its policy on the South China Sea.
The US Navy recently conducted several "freedom of navigation" operations with warships sailing near increasingly militarized man-made Chinese islands in the South China Sea, triggering strong protests from Beijing.
The forum is the Chinese equivalent of the World Economic Forum held in Davos, Switzerland, involving high-level talks among economic leaders.
Holding such large drills directly on the back of their economic forum sent a clear message to the world, Koh said.
"This is to highlight China is not just an economic power, but also a military and maritime power," he said.
CNN's Steve George and Josh Berlinger contributed to this article.