By Ben Blanchard
BEIJING (Reuters) - Japan scrambled fighter jets on Thursday when two Chinese naval planes flew close to disputed islands. Nothing came of the incident, but Tokyo's comments later spoke volumes about its anxiety as Beijing's military might grows.
"China's modernization of its military and increased activity is, along with insufficient transparency, a matter of concern," said Japan's chief cabinet secretary, Yukio Edano.
He was speaking a day before China is expected to unveil its new defense budget which will give a guide to how much it wants to build up a military whose growing reach is already unsettling others in the region.
A parliamentary spokesman is likely to announce the 2011 defense budget at a news conference on Friday, ahead of the weekend start of the annual session of the Communist Party-controlled legislature.
The budget went up by just 7.5 percent in 2010, or 532.1 billion yuan ($81 billion), after long periods of double-digit increases. Many observers believe the real figure is much higher.
China's top military newspaper, the Liberation Army Daily, on Thursday made clear the armed forces continued to see its role as central to China's development.
"In its development, China is shouldering unprecedented challenges and massive pressures," it wrote.
"To cope with a changeable scene rife with challenges, the forces must possess the capabilities needed for diverse military tasks, to ensure the safety and well-being of the people."
Beijing often points out that its defense spending pales in comparison with the United States and that its military upgrades are purely for defensive purposes.
The Pentagon last month rolled out a record base budget for fiscal year 2012 of $553 billion, up $22 billion from the level enacted for 2010.
The stealth fighters, advanced missile systems and aircraft carriers China has in the works have rattled the region, especially Taiwan, the self-ruled island China claims as its own, as well as Japan and India.
"If you have, for example, double-digit increases in spending year after year over 10 to 20 years or more, you are going to have a pretty dramatic increase in capabilities in a relatively short time," said Rory Medcalf, an international security expert at the Lowy Institute in Sydney.
"The stealth fighter was a very early test flight; there's no suggestion it is going to be an active capability for many years to come. But that capability will come in time," he added.
The United States, the world's only superpower with a military reach that far exceeds China's, is also looking on warily. New Chinese missiles that can take out an aircraft carrier are a particular concern for Washington.
U.S. Defense Secretary Robert Gates said in January that a U.S. military presence in the Pacific was essential to restrain Chinese assertiveness. China chose his visit to Beijing to announce it had test-flown a stealth fighter.
Japan said on Thursday it scrambled military jets after Chinese naval airplanes flew near disputed islands in the East China Sea, though the Chinese did not enter Japan's airspace.
Other nations are upgrading their forces in response to China. India increased annual defense spending by about 11.6 percent this week and is shopping for advanced fighter jets, transport aircraft, surveillance helicopters and submarines.
"Even Australia nowadays has a new military policy that is aiming at shoring up its naval power in anticipation of potential difficulties with China," said Jonathan Holslag, a fellow at the Brussels Institute of Contemporary China Studies.
"What a lot of Asian countries have in common is the rise of China," he added.
China's growing military clout has been accompanied by an increasingly assertive tone in Chinese diplomacy.
Relations between Asia's biggest economies chilled last year when Japan detained the Chinese skipper of a boat which crashed into its ships near disputed isles in the East China Sea, the site of vast potential gas and oil reserves.
China's loud, renewed claims to a vast swathe of waters and mostly uninhabited islets in the South China Sea, along with the expansion of its military presence there, likewise rattled Southeast Asian nations in 2010.
"Certainly China's behavior is being watched more and more closely. In the last half of last year many regional countries had reason to express caution and hesitation about some of China's actions," Geoff Raby, Australia's ambassador in Beijing, told the Foreign Correspondents Club of China.
(Additional reporting by Tyra Dempster, Maxim Duncan and Chris Buckley, and Chisa Fujioka in TOKYO, editing by John Chalmers and Jonathan Thatcher)