Jiang Enzhu, spokesman for China's National People's Congress, or parliament, stressed that China adhered to a path of peaceful development and said the money would be used to raise the pay of service personnel, improve training and upgrade military equipment.

"China pursues a national defence policy which is defensive in nature," Jiang told a news conference. "China's limited military capability is solely for the purpose of safeguarding independence, sovereignty and territorial integrity, and will not pose a threat to any country."

The planned allocation for the People's Liberation Army for 2008 was 417.769 billion yuan ($58.76 billion), up 17.6 percent on 2007.

U.S. officials have said China's growing might is aimed at Taiwan, the island Beijing regards as its territory and whose March 22 presidential election it will watch closely.

Jiang called the situation in the Taiwan Strait "grim and complex" and said a plan by Taiwan leader Chen Shui-bian to hold a referendum on election day on whether to seek U.N. membership under the name "Taiwan" was tantamount to a poll on independence.

"China's sovereignty and territorial integrity tolerate no division," Jiang said.

"We are fully prepared to repulse any adventurous activities towards Taiwan independence and to prevent anyone from separating Taiwan from China under any name or by any means."

China has claimed sovereignty over Taiwan since the end of the Chinese civil war in 1949. Beijing has vowed to bring the island back under mainland rule, by force if necessary.

The use of "Taiwan" -- rather than "Republic of China", the island's official name -- in Chen's latest campaign is viewed as particularly inflammatory by Beijing.

NUMBER GAMES?

This year's rise follows a 17.8 percent increase in defence spending for 2007, its largest rise in a decade, when the official outlay reached 350.92 billion yuan, or $45 billion.

Jiang said that China's spending on defence was increasing at a much lower rate than the pace of increase in government revenues, and accounted for 1.4 percent of its GDP -- less, he said, than that of the United States, Britain or India.

But international experts estimate China's true spending on the PLA could be as much as triple the stated figure.

On Monday, the Pentagon said China was developing weapons that would disable its enemies' space technology in a conflict and warned that the balance of forces in the Taiwan Strait continued to shift in China's favour.

Chinese Foreign Ministry spokesman Qin Gang called the report a distortion of the facts and said China had made representations to Washington in protest.

Xu Guangyu, a former PLA officer who now works in the China Arms Control and Disarmament Association, said China's budget increase was needed and was no cause for alarm.

"This rise is absolutely ordinary and entirely necessary. We're starting from a very low base -- only about a 12th of the United States' defence budget -- so we need bigger increases to reach world standards," he told Reuters.

The Bush administration last month requested $515.4 billion for the Pentagon in the next U.S. fiscal year, a figure that does not include extra spending for the wars in Iraq and Afghanistan.

"I'd guess that we will see similar rates of growth for the next five years at least," Xu said, adding there should be "no fuss" over the numbers.

But Nobutaka Machimura, the chief cabinet secretary in Japan, which vies with China for strategic influence in Northeast Asia, said double-digit increases continuing for many years were "honestly difficult for the rest of the world to understand". ($1=7.108 Yuan)