China announced on Monday an 8.1 percent defence budget increase for 2018, giving a boost to the modernisation of the world's largest military after spending slowed in the previous two years.

Beijing will splash out 1.11 trillion yuan ($175 billion) on its military, according to a budget report presented before the opening session of the annual National People's Congress.

"We will stick to the Chinese path in strengthening our armed forces, advance all aspects of military training and war preparedness, and firmly and resolvedly safeguard national sovereignty, security, and development interests," Premier Li Keqiang said in a report to the legislature.

China's neighbours and the United States have watched warily as Beijing has modernised its military, reducing its ground troops while spending on state-of-the-art hardware and weapons.

Li said the military had completed its goal of slashing troop numbers by 300,000, leaving the People's Liberation Army with a two-million-strong force.

At the same time, Beijing has imposed increasingly assertive claims to vast expanses of the contested South China Sea, while engaging in confrontations with Japan over disputed islands in the East China Sea and with India over Himalayan border regions.

The 2018 outlay compares with a seven percent increase last year and 7.6 percent in 2016, which marked the first time in six years that spending growth was not in double figures.

China spent $151 billion on the PLA last year, the second largest defence budget in the world but still four times less than the $603 billion US outlay, according to the International Institute for Strategic Studies, a London-based think tank.

The defence budget increase has roughly kept pace with China's national economic output in recent years. The economy grew by 6.9 percent in 2017 and the government said Monday it will target growth of around 6.5 percent in 2018.

"We can expect that China's defence budget will continue to be subordinated to, and coordinated with, China's economic performance. It will likely not be over-militarised," said James Char, a military expert at Singapore's Nanyang Technological University.

- 'World-class' army -

As the PLA marked its 90th anniversary in August, Xi warned that China will protect its sovereignty against "any people, organisation or political party".

Since coming to power in 2012, the president has trumpeted the need to build a stronger combat-ready military, while cementing his leadership over the army, which was ordered to pledge absolute loyalty to him last year.

At a major Communist Party congress in October, Xi vowed to build a "world-class" fighting force by 2050.

The PLA has stocked up on stealth fighter jets, warships and high-tech weaponry over the years.

"Technologically speaking, the PLA has progressed markedly in recent years, with its own research and development in military hardware and growing professionalism reducing the gap with its US counterpart," Char said.

Last year, China unveiled its first domestically-built aircraft carrier, which will carry J-15 fighters that will take off from a raised "ski jump" platform. It also launched a new class of destroyer.

Its military has one operational carrier -- the Liaoning -- a Soviet-era vessel bought from Ukraine that was refitted and commissioned in 2012.

The chairman of the Dalian Shipbuilding Industry, which worked on both ships, said the company was "ready to build larger" carriers after gaining the experience to make more, the state-run China Daily newspaper said Friday.

China has also opened its first overseas military base in the Horn of Africa country of Djibouti.

Since 2008, its navy has participated in anti-piracy operations off the coast of Somalia and in the Gulf of Aden.

Closer to home, China has in recent years built artificial islands -- some with airstrips -- capable of hosting military installations in the South China Sea, inflaming tensions with its Southeast Asian neighbours.

US warships, meanwhile, regularly conduct "freedom of navigation" operations near the islands to challenge China's territorial claims.

Brunei, Malaysia, the Philippines, Vietnam and Taiwan have contested China's claims to the sea.

China's military budget is "disproportional in the sense that the economies of Southeast Asia do not have the resources to keep pace" and Japan's constitution restricts military spending, said Matthew Funaiole, a fellow with the China Power Project at the Center for Strategic and International Studies (CSIS) in Washington.

"Whether or not this is a 'threat' depends on how China utilises its capabilities. That said, its maritime presence is certainly growing."

China sets 2018 GDP target at 'around 6.5%'
Beijing (AFP) March 5, 2018 - China set its 2018 economic growth target at "around 6.5 percent" on Monday, in line with expectations but lower than the 6.9 percent increase registered last year.

The target, which is the same as last year, was presented by Premier Li Keqiang in a report for Monday's opening session of the annual National People's Congress, the rubber-stamp parliament.

The figure, along with an inflation target of three percent, is "fitting given the fact that China's economy is transitioning from a phase of rapid growth to a stage of high-quality development" and will allow the country to "achieve relatively full employment", the report said.

China beat forecasts in 2017 as the world's second largest economy grew by 6.9 percent, picking up steam for the first time since 2010 despite a battle against massive debt and polluting factories.

Beijing has largely relied on debt-fuelled investment and exports to drive its tremendous economic growth of the past four decades but it is now seeking to move to more sustainable consumption-based growth.

In its report, the country vowed to "cut overcapacity, reduce excess inventory, deleverage, lower costs and strengthen areas of weakness".

China will cut steel capacity by 30 million tonnes and coal by 150 million tonnes in 2018, according to the report.

The country is also facing pressure to prevent a credit crisis, with local government debt growing 7.5 percent last year to $2.56 trillion, according to figures in January.

"China's economics and financial risks are on the whole manageable," the report said.

But it pledged to "see that internal risk controls are tightened in financial institutions," adding that Beijing plans to crack down on the kinds of financial shenanigans that have seen some of the country's largest corporations teetering on the brink of collapse in recent months.

"There will be a serious crackdown on activities that violate the law like illegal fundraising and financial fraud," it said.

China has moved aggressively over the past year to slam the brakes on companies like private insurer Anbang, which ran up gargantuan debts to fund pricey overseas acquisitions.

Late last month, Beijing took over heavily leveraged Anbang, confirming some analysts' fears about the toxic levels of debt plaguing China's economy.

The looming danger is just one of many strong headwinds the country faces as it attempts to achieve its GDP target this year.

The country is also facing a potential trade war with the US, which levied tariffs on steel and aluminium imports last week and has been considering taking direct measures against Chinese products.

US President Donald Trump is determined to change the balance of trade between the two countries.

China's trade surplus with the US swelled 10 percent to $275.8 billion last year, a record high.

"China doesn't want a trade war with the United States," Zhang Yesui, spokesman for the National People's Congress, told a news conference on Sunday.

"But if the US takes actions that hurt Chinese interests, China will not sit idly by," he warned.

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