Beijing: China has hiked its defence outlay for 2007 by 17.8 per cent to $43.95 billion to improve its military's capability to fight a "defensive war" and safeguard national sovereignty and territorial integrity.

This year's defence budget accounts for 7.5 per cent of the budgeted fiscal expenditure, compared with 7.7 per cent in 2004, 7.3 per cent in 2005 and 7.4 per cent in 2006 or $35.09 billion.

Chinese finance minister Jin Renqing said the government has allocated 347.23 billion yuan ($43.95 billion) for the current fiscal, registering a growth of 17.8 per cent over last year. He said te extra money will be spent on boosting living allowances for the armed forces, training and upgrading military armaments.

Jin told the delegates to the fifth session of the 10th National People's Congress, the budgetary outlay for 2007 would cover the cost of improving the Army's ability to fight a defensive war under hi-tech conditions and respond to emergencies, safeguarding the country's sovereignty and territorial integrity, and appropriately increasing benefits for military personnel.

Jin's reference to protecting China's territorial integrity mainly refers to the unresolved issue of Taiwan, which Beijing views as a rebel province. China vigorously opposes Taiwanese independence.

China's defence spending has long been a source of concern to India, Japan and the US, which suspects China of spending up to three times the officially disclosed figures.

US deputy secretary John Negroponte had urged China to be more transparent on its military spending and its military plans, during his visit to China yesterday.