China says defence spending pace to slow, to improve intelligence

By Michael Martina and Ben Blanchard

BEIJING (Reuters) - China said on Saturday it will raise military spending by 7.6 percent this year, its lowest increase in six years, but vowed to protect its maritime rights amid disputes in the East and South China Seas and improve intelligence gathering.

The 954.35 billion yuan ($146.67 billion) figure is only around a quarter of the U.S. Defense Department budget for 2016 of $573 billion, but comes at a time of rising concern over China's intentions in territorial disputes.

The increase is the first single-digit rise since 2010, following a nearly unbroken two-decade run of double-digit jumps, and comes as China's economy slows.

It was announced on Saturday at the start of the annual meeting of parliament, but had been flagged by an official who gave a rough figure the previous day.

President Xi Jinping is seeking to drag the People's Liberation Army, the world's largest armed forces, into the modern age, cutting 300,000 jobs and revamping its Cold War-era command structure.

However, the reforms have run into opposition from soldiers and officers worried about job security and few details have been released as to what will happen to those laid off.

Premier Li Keqiang told the opening of China's largely rubber-stamp parliament that the country will "strengthen in a coordinated way military preparedness on all fronts and for all scenarios".

"We will work to make the military more revolutionary, modern and well-structured in every respect, and remain committed to safeguarding national security," he said.

"We will make steady progress in reforming military leadership and command structures and launch reform of the military's size and structure as well as its policies and institutions."

"ECONOMIC HEADWINDS"

The official Xinhua news agency attributed the slowdown in the pace of defence spending to "rising economic headwinds and last year's massive drawdown of service people".

China's Defence Ministry, in a commentary on its website, described the slower pace as "appropriate".

"It certainly doesn't mean the Chinese people's dreams of a strong country and military will be impacted upon," it added.

Beijing is feeling public pressure to show it can protect its claims to the South China Sea after the United States began conducting "freedom of navigation" operations near islands where China has been carrying out controversial reclamation work and stationing advanced weapons.

A draft of the five-year plan, a blueprint for the country's aspirations from this year through to 2020, said China would strengthen its capabilities in maritime law enforcement and "appropriately handle" infringements of its maritime rights, though it gave no details.

The Global Times, a widely read tabloid published by the ruling Communist Party's People's Daily, said that for many Chinese the smaller increase "was a bit of a disappointment", but called for understanding.

"There is no need to spend hugely to catch up with the U.S., which seeks to keep its global military presence. China's regional military deterrence aimed at national defence has been taking shape."

The five-year plan also said China would improve its national security "technology and equipment construction" and raise the country's intelligence gathering abilities.

China, the world's second-largest economy, is increasingly exposed to international crises like the Middle East but has little experience at dealing with them, unlike established powers like the United States and Russia.

Underscoring the sensitivity of China's defence spending, about a dozen senior officers approached by Reuters on the sidelines of parliament declined to comment on the matter.

In a government-arranged interview the previous evening, Chen Zhou, a researcher at the Academy of Military Science, said a more modern army needed better training and this is where defence funds should be spent.

"Investment in troop training needs to increase, as only this way can we allow our military to walk down a path of military professionalism."

($1 = 6.5066 yuan)

(Additional reporting by Jessica Macy Yu and James Pomfret, and John Ruwitch in SHANGHAI; Editing by Kim Coghill and Nick Macfie)