By Michael Martina and Greg Torode
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 defense budget by 12.2 percent this year to 808.23 billion yuan ($131.57 billion), as China seeks to develop more high-tech weapons and to beef up coastal and air defenses.
The increase follows a nearly unbroken run of double-digit hikes in the Chinese defense budget, second only to the United States in size, for the past two decades.
"This is worrying news for China's neighbors, 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.
The 2014 defense budget is the first for Xi, the 'princeling' son of a late Communist Party elder, and the increase in spending appears to reflect his desire to build what he calls a strong, rejuvenated China.
Xi also recently urged China's military leadership to work faster to get the country's sole aircraft carrier combat-ready.
The spending jump is the biggest since a 12.7 percent rise in 2011.
Within hours of the announcement, officials in Japan and Taiwan expressed disquiet over the absence of any details on how Beijing will spend the money, concerns long echoed in Washington.
China and Japan, a key U.S. ally in the region, are increasingly locking horns over uninhabited rocky islands each claims in the East China Sea.
China's military is not made up of "boy scouts with spears", Chinese Foreign Ministry spokesman Qin Gang told a briefing in response to Japan's criticism.
"Some foreigners always expect China to be a baby scout," Qin said. "In that way, how can we safeguard national security and world peace?"
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.
Speaking at the opening of China's annual session of parliament, Premier Li Keqiang said the government would "strengthen research on national defense and the development of new- and high-technology weapons and equipment" and "enhance border, coastal and air defenses".
"We will comprehensively enhance the revolutionary nature of the Chinese armed forces, further modernize 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 defense identification zone that covers disputed Japanese-administered islands in the East China Sea. Beijing's aircraft carrier, meanwhile, 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.
Nevertheless, experts say it could be decades before China's military is a match for America's armed forces.
CHINA URGED TO BE TRANSPARENT
Japan's chief cabinet secretary, Yoshihide Suga, said China's lack of clarity in its defense policy and spending was a global concern.
While noting the "substantial" spending increase was needed to modernize China's military, David Lo, a spokesman for Taiwan's Defence Ministry, said much remained hidden.
"The transparency of China's defence budget has always been questionable, as it is widely seen there are a massive amount of military items hidden," he said.
In Washington, 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.
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.
"We remain concerned about a lack of transparency regarding China's growing military and its increasingly assertive behavior in the maritime domain," Helvey said.
China has repeatedly said that the world has nothing to fear from its military spending, which it says is needed for legitimate defensive purposes and to modernize equipment.
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 added.
($1 = 6.1430 Chinese yuan)
(Additional reporting by Li Hui, Joseph Campbell and Ben Blanchard in Beijing, John Ruwitch in Shanghai, Nobuhiro Kubo in Tokyo, Faith Hung in Taipei and David Brunnstrom in Washington. Writing by Greg Torode. Editing by Dean Yates)
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