A draft budget, which the National People’s Congress will approve, said defence spending would be hiked to 1.45 trillion Yuan or around $ 230 billion.

China on Saturday announced a 7.1% hike in its defence spending as well as an annual GDP growth target of “around 5.5%” for the coming year.

China’s Premier and second-ranked leader Li Keqiang announced the GDP target at the opening of the week-long session of the National People’s Congress (NPC) or Parliament, which approves policies for the coming year.

A draft budget, which the NPC will approve, said defence spending would be hiked by 7.1% to 1.45 trillion Yuan or around $ 230 billion. The military budget was hiked by 6.8% last year when it crossed the $200 billion mark for the first time. India’s military spending this year was announced as around $70 billion, a 4.4% hike from the previous year, although a greater share of India’s defence spending goes towards imports and pensions.

The Communist Party-run Global Times said the hike this year reflected “security threats China is facing.”

“The U.S. has been applying military pressure on China over the past few years, stirring up trouble on the doorsteps of China through operations like provocative, monthly warship transits in the Taiwan Straits, close-in reconnaissance missions with spy planes in the East China Sea and the South China Sea of more than 1,200 times in 2021, and a number of warship intrusions in Chinese territorial waters in the South China Sea in the name of freedom of navigation,” the paper said, adding that “the U.S. also organised the security dialogue Quad with Japan, India and Australia, and formed the new security pact AUKUS with Australia and the U.K., both designed to surround China militarily.” The paper noted that “while the situation along the China-India border has been kept stable and manageable, the standoffs remain to be completely solved after rounds of talks.

An increasing share of the budget in recent years has been devoted to the modernisation of the PLA Navy, which will launch China’s third aircraft carrier this year. Another spending would fund plans to “expand production of the J-20 stealth fighter jet and modernise the nuclear arsenal,” the paper quoted analysts as saying, part of broader plans to build a “world-class military”, on par with the U.S., by 2049 when the People’s Republic of China turns 100.

On the economy front, Premier Li announced an expected GDP target of “around 5.5%”, down from the 6% target for last year, when the economy grew by 8.1% but slowed to 4% in the last quarter. He said “economic stability” was the priority, with a target of 11 million new jobs in 2022.

China would also “continue its effective routine COVID-19 control to prevent inbound cases and domestic resurgences”, he said, meaning that the “zero COVID” strategy and international travel restrictions are likely to remain in place in China, the only major country to continue to do so.

The GDP target will mean striking a balance with keeping growth ticking and fixed asset investment without exacerbating the debt problem. The IMF in January forecast 4.8% growth for China, pointing to “subdued private consumption and real estate investment” as headwinds.

“As a result, significant slack in the economy is expected to remain in 2022,” the forecast said, noting that “a wave of regulatory policy measures targeting technology sectors, while intended to strengthen competition, consumer privacy, and data governance, has increased policy uncertainty that has been further heightened by the financial stress faced by large property developers following policy efforts aimed at deleveraging.