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China confirms 7 percent increase in 2017 defence budget

BEIJING China’s defence budget will rise 7 percent in 2017, to 1.044 trillion yuan ($151.43 billion), state media said on Monday, after the omission of exact figures from an annual report sparked questions over transparency on military spending.

The budget increase, a figure that is closely watched around the world for clues to China’s strategic intentions, is the smallest in more than a decade, as economic growth has slowed, with a target of about 6.5 percent for the year.

The spokeswoman for China’s parliament, Fu Ying, said on Saturday that defence spending for this year would rise about 7 percent, accounting for about 1.3 percent of gross domestic product – matching the level of the last few years.

But in a highly unusual move, the Finance Ministry did not give spending figures in a report at the opening of an annual meeting of parliament on Sunday, even as China pledged to strengthen maritime and air defences.

The official Xinhua news agency gave the figures on its microblog, citing an unnamed Finance Ministry official.

The expenditures would be used “mainly to support the deepening of national defence and military reforms”, the official said, without elaborating.

Last year’s hike of 7.6 percent in the defence budget was the lowest in six years and the first single-digit rise since 2010, following a nearly unbroken two-decade run of double-digit increases.

China has repeatedly said its defence spending is transparent and it was not clear why defence numbers were not initially released. Huang Shouhong, director of the State Council Research Office, told reporters on Sunday there was “nothing secret about it”.

China’s military build-up has rattled nerves around the region, with its increasingly assertive stance in territorial disputes in the East China Sea, the South China Sea and over Taiwan, which China claims as its own.

Even with the rise of 7 percent, China’s defence spending amounts to only about a quarter of the U.S. defence budget, though many experts believe China’s actual spending on the military to be higher than the official figure.

The White House has proposed a 10 percent increase in military spending to $603 billion, even though the United States has wound down major wars in Iraq and Afghanistan and is already the world’s pre-eminent military power.

China has been moving rapidly to upgrade military hardware, but integration of complex systems across a regionalised command structure has been a major challenge, which the reforms aim to tackle.

Other concerns for China’s military include how to deal with the 300,000 troops President Xi Jinping announced in 2015 would be cut, mainly by the end of 2017.

Last month Chinese military veterans demonstrated in central Beijing for two consecutive days, demanding unpaid retirement benefits in a new wave of protests highlighting the difficulty of managing demobilised troops.

($1=6.8941 Chinese yuan)

(Reporting by Michael Martina and Ben Blanchard; Editing by Clarence Fernandez)