China will increase its defence budget by 7.5 per cent to Rmb1.2tn ($179bn) this year, as the Communist party attempts to balance the cost of building its military into a modern war fighting force with growing economic challenges.

The move continues 25 years of increases that have made China the world’s second-largest military spender, although its total is still dwarfed by the US budget of $686.1bn for this year. The announcement comes as the People’s Liberation Army enters the home stretch of its largest-scale  reorganisation in decades, which President Xi Jinping has said must show “initial results” next year. 

“Maintaining the rise in defence spending is needed to safeguard national security and transform the military,” Zhang Yesui, spokesman for the National People’s Congress, told reporters. Mr Zhang contrasted China’s spending — at 1.3 per cent of official GDP — with that of “other countries” that budget 2 per cent or more.