BEIJING/HONG KONG (Reuters) - China announced its biggest rise in military spending in three years on Wednesday, a strong signal from President Xi Jinping that Beijing is not about to back away from its growing assertiveness in Asia, especially in disputed waters.
The government said it would increase the defence budget by 12.2 percent this year to 808.23 billion yuan ($131.57 billion), partly to develop more high-tech weapons and to beef up coastal and air defences.
The increase follows a nearly unbroken run of double-digit hikes in the Chinese defence budget, second only to the United States in size, for the past two decades.
"This is worrying news for China's neighbours, particularly for Japan," said Rory Medcalf, a regional security analyst at the independent Lowy Institute in Sydney.
Those who thought Xi might prefer to concentrate on domestic development over military expansion in a slowing economy had "underestimated the Chinese determination to shape its strategic environment", he added.
China and Japan are increasingly locking horns over uninhabited rocky islands each claims in the East China Sea.
Beijing also claims 90 percent of the 3.5 million sq km (1.35 million sq mile) South China Sea, which is believed to be rich in oil and gas. The Philippines, Vietnam, Malaysia, Brunei and Taiwan claim parts of those waters.
The 2014 defence budget is the first for Xi since he became president. The spending increase is the biggest since a 12.7 percent jump in 2011.
Speaking at the opening of China's annual session of parliament, Premier Li Keqiang said the government would "strengthen research on national defence and the development of new- and high-technology weapons and equipment" and "enhance border, coastal and air defences".
"We will comprehensively enhance the revolutionary nature of the Chinese armed forces, further modernise them and upgrade their performance, and continue to raise their deterrence and combat capabilities in the information age," Li told the largely rubber-stamp National People's Congress.
He gave no details.
China's military spending has allowed Beijing to create a modern force that is projecting power not only across the disputed waters of the East and South China Seas, but further into the western Pacific and Indian Oceans.
Much military spending likely takes place outside the budget, however, and many experts estimate real outlays are closer to $200 billion. The U.S. Defense Department's base budget for fiscal 2014 is $526.8 billion.
The budget spike comes as Asia reacts nervously to a string of recent moves by China to assert its sovereignty in disputed territory, expand its military reach and challenge the traditional dominance of U.S. forces in the region.
Chinese fighters and surveillance planes now routinely patrol a controversial new air defence identification zone that covers disputed Japanese-administered islands in the East China Sea. Meanwhile, Beijing's sole aircraft carrier went on its first exercises in the South China Sea late last year.
At a time when Washington has stepped up its military presence in the region as part of a strategic "pivot" toward Asia, China is building new submarines, surface ships and anti-ship ballistic missiles, and has tested emerging technology aimed at destroying missiles in mid-air.
Toshi Nakayama, a security expert at the Aoyama Gakuin University in Japan, said Tokyo saw a stronger Chinese military as a worry "but a more capable submarine force would be a particular threat".
Nevertheless, experts say it could be decades before China's military is a match for America's armed forces.
David Helvey, U.S. deputy assistant secretary of defense for East Asia, told a U.S. Senate committee hearing on Tuesday that the Pentagon was seeking to build "healthy" ties with China's military, but said Beijing needed to be more open about its armed forces buildup.
"We remain concerned about a lack of transparency regarding China's growing military and its increasingly assertive behaviour in the maritime domain," Helvey said.
China has repeatedly said the world has nothing to fear from its military spending, which it says is needed for legitimate defensive purposes.
Fu Ying, a spokeswoman for the parliamentary session, reiterated that policy on Tuesday, saying China was seeking peace through "strength".
China would "respond effectively" to provocations by those ready to sabotage regional security and order, she said.
The United States last month said it was concerned that China's maritime claims in the South China Sea were an effort to gain creeping control of oceans in the Asia-Pacific region.
($1 = 6.1430 Chinese yuan)
(Additional reporting by Li Hui and Ben Blanchard in Beijing, John Ruwitch in Shanghai, Nobuhiro Kubo in Tokyo and David Brunnstrom in Washington. Writing by Greg Torode. Editing by Dean Yates)