The black J-31 rose in a nearly vertical climb on take-off in Zhuhai before circling back and doing two rolls, in the aircraft's first announced public appearance.
"It's the new one," shouted one spectator.
The plane's existence has been the subject of rumour and speculation for years, with photographs appearing increasingly frequently on military websites in recent months.
Defence analysts say the J-31 is China's answer to the United States' F-35, though the Chinese jet lags behind the American one technologically.
The fighter's Chinese name is "Falcon Eagle" and it is manufactured by a unit of Aviation Industry Corporation of China (AVIC), whose defence arm uses the slogan: "We are making the best weapons for guardians of the peace."
The plane's debut comes amid tensions between China and its neighbours over territorial disputes, particularly Japan which has feuded with Beijing over a group of islands in the East China Sea.
China's air force said the display of military might at the airshow showed the intention to build a strong country.
The People's Liberation Army (PLA) air force "will make unremitting efforts to realise dreams of a strong China and powerful armed forces", read a sign alongside an array of eight warplanes at the airshow.
"The display... demonstrates the strength and confidence of (the) PLA Air Force to fulfil missions and achieve world peace."
China has steadily increased its defence budget for years, with funding projected to rise more than 12 per cent to $132 billion in 2014. But the US has accused Beijing of under-reporting its spending by as much as 20 percent in the past.
Defence analysts said China appears eager to sell the new fifth generation fighter abroad, also putting on display a model with a designation typically used for overseas destinations: FC-31.
"China's defence industry wants to show the potential for export," said Andrew Erickson, associate professor at the China Maritime Studies Institute of the US Naval War College.
Ally Pakistan is a likely first market, he added.
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Congratulations Pakistan for your achievement.