By Ben Blanchard
BEIJING (Reuters) - China will beef up its military budget by 12.7 percent this year, the government said on Friday, a return to double-digit spending increases that will stir regional unease.
The country's growing military clout has been accompanied by a more assertive tone in Chinese diplomacy, evident in spats last year with Japan and Southeast Asia over disputed islets, and in numerous rows with Washington.
Chinese parliamentary spokesman Li Zhaoxing said the defense budget would be 601.1 billion yuan ($91.5 billion) in 2011, from 532.1 billion yuan last year. The budget went up by just 7.5 percent in 2010, after long periods of double-digit hikes.
Many experts believe China's actual spending on the 2.3 million-strong People's Liberation Army (PLA) is far higher than what the government reports.
"What this budget figure suggests is that deep down, China's priorities haven't changed," said Rory Medcalf of Australian think tank the Lowy Institute.
"The PLA is an important and powerful force in decision-making and there is obviously a desire to signal to the Chinese public and Chinese nationalists that China is going to continue to get stronger."
That signal may prompt greater wariness from neighbors.
Japan said on Thursday it scrambled military jets this week after Chinese naval planes flew near disputed islands in the East China Sea, although the Chinese did not enter Japan's airspace.
The Philippines also demanded an explanation from China over an incident on Wednesday in a disputed area in the South China Sea, where it says two Chinese patrol boats threatened to ram a survey ship.
Other nations are upgrading their forces in response to China's build-up, which included the first test flight of the J-20 stealth fighter jet in January, a show of muscle during a visit by U.S. Defense Secretary Robert Gates.
China could also launch its first aircraft carrier this year, according to Chinese military and political sources, a year earlier than U.S. military analysts had expected,
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.
"For the United States, for Japan, for India, for all of China's neighbors, this is a burgeoning force whose capabilities are going to start seriously challenging everybody's security calculations," said Dean Cheng, China security expert at the Heritage Foundation in Washington.
Spokesman Li said the military spending rise was justified. China posed no threat to anyone, he added.
"China's defense spending is relatively low by world standards," he said. "China has always paid attention to restraining defense spending."
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.
"U.S. spending is still so far ahead of China's that overall the gap -- which is still very wide -- is actually growing," said Andy Gilholm, senior China analyst for risk consultancy Control Risks.
"But the key issue for the U.S. and its regional allies is not the gap in spending or overall capabilities, but the extent to which China could potentially threaten or constrain U.S. ability to use its military dominance to help support its goals in the region."
Relations between China and Japan chilled last year when Japan detained the Chinese skipper of a boat that 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.
Still, a retired Chinese military officer, Xu Guangyu, said the spending rise was needed to cope with inflation, which was eating into paychecks and equipment outlays.
"In the next two years the wages of some military personnel will have to rise relatively quickly, because inflation is quite high," said Xu.
"Military equipment, uniforms and logistics are all feeling the pressure of price rises."
(Additional reporting by Sabrina Mao, Sally Huang, Chris Buckley and Michael Martina in BEIJING, James Grubel in CANBERRA, Jeremy Laurence in SEOUL and Paul Eckert in WASHINGTON, Editing by Dean Yates)