March 4, 2015 / 4:02 AM / 2 years ago

China defense budget rise to defy slowing economy

Soldiers of People's Liberation Army (PLA) stand inside tanks at a drill during an organised media tour at a PLA engineering academy in Beijing July 22, 2014.Petar Kujundzic

BEIJING (Reuters) - China's defense budget this year will rise about 10 percent compared with 2014, a top government official said on Wednesday, outpacing the slowing economy as the country ramps up investment in high-tech equipment such as submarines and stealth jets.

Parliament spokeswoman Fu Ying told reporters the actual figure would be released on Thursday, when the annual session of the largely rubber-stamp National People's Congress opens.

Last year, defense spending was budgeted to rise 12.2 percent to $130 billion, second only to the United States.

The official Xinhua news agency said the 2015 target - which would put defense outlays at around $145 billion - would represent the slowest growth in military spending in five years.

China has logged a nearly unbroken two-decade run of double-digit budget increases, though many experts think the country's real defense outlays are larger than stated.

The military build-up has jangled nerves around the region, particularly as China has taken an increasingly robust line on its territorial disputes in the East and South China Seas.

Asked about China's defense spending, Japanese Chief Cabinet Secretary Yoshihide Suga said Japan was concerned the figure "lacks transparency."

"It is true, regardless of China's defense spending, that the security situation in the region surrounding Japan is severe for various reasons," he added.

"On top of our own efforts in the field of diplomacy and defense, it is extremely important for our country to strengthen the U.S.-Japan alliance."

India Lagging

India is working to narrow the military gap with China, which has unnerved New Delhi with forays into the Indian Ocean.

An Indian defense official looking at regional security issues said the double-digit rise was no surprise.

"There was some talk it could slow down in view of the economic slowdown, but our sense was modernization will remain on track," the official said.

India has announced a $40 billion defense budget for 2015-16, representing a 7.9 percent rise over the allocation for 2014-15. Defense analysts said it may not be enough to acquire fighter planes, submarines and warships all at once.

In the United States, the Obama administration has proposed an increased $534 billion Pentagon base budget plus $51 billion in war funds as it urged Congress to end cuts it says erode U.S. military power.

Fu said China faced greater challenges in modernizing its military than "great powers".

"We have to rely on ourselves for most of our military equipment and research and development," Fu said.

"Fundamentally speaking, China's defense policy is defensive in nature. This is clearly defined in the constitution. We will not easily change this direction and principle."

Serving and retired military officers have said pervasive graft has undermined the armed forces' prowess and morale among the rank and file, a problem robust spending may help alleviate.

Chinese President Xi Jinping has pursued corrupt officials in all walks of life, and among the most powerful people ensnared by the campaign have been former top military officers.

While Beijing keeps the details of its military spending secret, experts have said additional funding would likely go towards beefing up the navy with anti-submarine ships and developing aircraft carriers beyond a sole vessel in operation.

Naval Shopping List

"Carriers have definitely got to be on the list," said John Blaxland, Senior Fellow at the Strategic and Defense Studies Centre at the Australian National University in Canberra.

"But also we've seen a massive surge in the number of submarines, and of course everybody loves submarines. The intimidatory effect of a submarine is hard to beat."

Money would also likely go into cyber capabilities and satellites, Blaxland added.

China's leaders have routinely sought to justify the country's military modernization by linking defense spending to rapid GDP growth. But growth of 7.4 percent last year was the slowest in 24 years, and a further slowdown to around 7 percent is expected in 2015.

"We have achieved so much success with reform and opening up, we have not relied on gunboats to develop roads, but instead we have relied on complete and mutual beneficial cooperation," Fu said.

"We have been successful on this road, the road of peaceful development. We will adhere to the path of peaceful development."

U.S. military and diplomatic "rebalancing" towards Asia and Xi's crackdown on corruption in the People's Liberation Army, which has caused some disquiet in the ranks, are among the other factors keeping military spending high, experts have said.

Beijing also says it faces a threat from Islamist militants in the far western region of Xinjiang, and is drafting a new anti-terror law that will create a legal framework for sending troops abroad on counter-terrorism missions.

Additional reporting by Sui-Lee Wee and Ben Blanchard in Beijing, Matt Siegel in SYDNEY, Manuel Mogato in MANILA, Sanjeev Miglani in NEW DELHI and Kiyoshi Takenaka and Takashi Umekawa in TOKYO; Editing by Alex Richardson and Mike Collett-White

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