China Spending Billions More On Defence

China is to increase its defence budget spending by 10.7%, the country's government has announced.

The increase means a total of RMB720bn (£76.4bn) will be allocated to the Chinese military. 

The announcement said: "Funds will be used to support efforts to improve the working and living conditions of officers and enlisted personnel, make the armed forces more mechanised and information-based, and safeguard national security."

The announcement comes on the first day of China's National People's Congress (NPC).

The annual event holds more significance this year because it coincides with the once-in-a-decade leadership transition in the ruling Communist Party.

Some 3,000 delegates from provinces around the country gather in Beijing's Great Hall of the People for the 12-day event. 

Together they create the world's largest parliament, whose job, in theory, is to vote on and enact laws proposed by the ruling party.

In practice though, the NPC is widely seen as nothing more than a rubber-stamping body which gives a nod to decisions that have already been made by the Communist Party.

The defence budget increase comes at a time of significant regional tensions.

China is locked in an increasingly bitter territorial dispute with Japan over a set of tiny islands in the East China Sea.

The two countries both hold a territorial claim to the islands and have come close to clashing on several occasions in recent months.

The European Council on Foreign Relations (ECFR) has warned that the dispute is a threat to regional peace.

China has made no secret of its desire to project its power beyond its borders, but it is not alone in increasing its defence budget.

Japan's new Prime Minister Shinzo Abe did the same in January and America has pledged to realign its forces towards the Asia-Pacific region over the coming decade.

The US annual defence budget in 2012 was £418bn, significantly more than China's publicly-stated increase to £76bn.

Senior British diplomatic sources have told Sky News of their concern over the China-Japan dispute.

The fear is that an accidental clash between the two navies could escalate matters very quickly.

A Japanese diplomat, speaking on condition of anonymity, recently told Sky News that there was currently no "hotline" between the two militaries, increasing the chances of a "misunderstanding".

The opening day of the National Party Congress is traditionally the moment for the outgoing Premier to deliver a speech reflecting on the achievements of the past 5 years.

Premier Wen Jiabao outlined a "truly extraordinary period of time in the course of China's development."

He ran through the figures which characterise China's continued rise over the past five years:

:: GDP up from £2.8tn to £5.5tn.

:: 58.7 million jobs created.

:: 18 million government-subsidised houses built.

:: 19,700km (12,241 miles) of railway laid.

:: 609,000km (378,415 miles) of roads constructed.

:: 31 new airports opened.

Premier Wen, who steps down during this congress, predicted the economy would grow by "around 7.5%" in 2013 but warned of challenges.

"Our country still faces many difficulties and challenges in its economic development in 2013, an we need to work hard if we want to attain a growth target of around 7.5%," he said.

The economy remains the biggest challenge for China. It has largely avoided a direct hit by the global economic crisis but the knock-on effects have slowed manufacturing and exports.