China says defense spending rise slows to 7.5 percent

Paramilitary policemen patrol around the Forbidden City, in Beijing March 4, 2010.

BEIJING (Reuters) - China kept the rise in its military budget to 7.5 percent in 2010, a spokesman said on Thursday, a slowdown that left observers skeptical after an increase in tensions with the United States.

Some foreign analysts were surprised by the figure after more than two decades of nearly unbroken double-digit rises in China's defense budget, and said the announced numbers were unlikely to show the growing power's real military spending.

"All the evidence suggests that they are on a very powerful trajectory of expansion in substantive terms, and they seem to use this figure for political purposes almost, to send signals," said Ron Huisken, a China defense expert at the Australian National University in Canberra.

The announcement came after quarrels with the United States over human rights, Internet censorship, Tibet and Washington's arms sales to Taiwan, the self-ruled island Beijing claims as its own.

Chinese parliamentary spokesman Li Zhaoxing said the increase would bring the country's defense budget for the year to 532.1 billion yuan ($77.95 billion), or 37.1 billion yuan more than what was actually spent on defense in 2009.

The budget for the People's Liberation Army (PLA) showed Beijing was not seeking confrontation, Li told a news conference a day ahead of the opening of China's annual parliament, or National People's Congress.

China has 2.3 million personnel in its armed forces, more than any other nation. The government has sought to slim numbers and lift troop quality by offering better benefits.

"I think the (Chinese) armed forces will be dissatisfied," Ikuo Kayahara, a retired Japanese major-general who teaches security studies at Takushoku University, said.

"The world has been criticizing China for increasing its defense budget by more than 10 percent every year," he said. "China may be reacting to this by trying to show that it is not focused only on expanding its armed forces."

MORE NEEDED TO MODERNISE

Xu Guangyu, a researcher for the China Arms Control and Disarmament Association and retired PLA major general, said he would have been happier with a higher number to fund faster equipment improvements.

"This number comes after we've had increases that have basically overcome the problems we faced with poor conditions and wages for military personnel," he told Reuters.

"But we do need to keep up a certain rate of growth to reach a necessary level of military modernization. An increase of, say, 10 percent would have been more appropriate."

Last year, the government set the official military budget at 480.7 billion yuan ($70.4 billion), a 14.9 percent rise on the one in 2008.

Li indicated actual defense spending in 2009 reached 495 billion yuan, apparently reflecting the fact government revenues grew more than the budget projected.

U.S. President Barack Obama has proposed a record $708 billion in defense spending for the fiscal year 2011, and China often says its defense spending pales in comparison.

A PLA officer had called for a rise in 2010 military spending that would send a defiant signal to the United States after Washington moved forward in January with plans to sell $6.4 billion in arms to Taiwan.

Another PLA officer, teaching at an elite university for training officers, has stirred controversy with a book urging China to build the world's strongest military and displace the United States as global "champion.

"China will adhere to a path of peaceful development," said the parliamentary spokesman Li, a former foreign minister. "Our defense spending is relatively low."

Two senior U.S. diplomats visited Beijing this week seeking to ease Sino-U.S. tensions.

Chinese Foreign Ministry spokesman Qin Gang told a news conference on Thursday that recent U.S. actions had "caused a great deal of disturbance to the relationship" and it was now up to Washington to make amends.

Li said China's spending would help the PLA improve its technology and cope with increasing tasks.

Taiwan's Deputy Minister of Defense, Andrew Yang, said his government and the region were wary of those advances.

"They're putting a lot of resources into modernization, including advanced weapons systems," said Yang. "That kind of improvement certainly raises the eyebrows of surrounding countries in Asia, and especially the United States."

($1=6.826 yuan)

(Additional reporting by Tom Miles and Benjamin Kang Lim in Beijing; Rob Taylor in Sydney; Ralph Jennings in Taipei; and Isabel Reynolds in Tokyo; Editing by Jeremy Laurence)