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China's 2023 defence spending to rise 7.2%

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Increase to outpace GDP growth target of around 5%

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Premier Li says armed forces should boost combat preparedness

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China investing in new hardware including aircraft carriers

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By Yew Lun Tian

BEIJING, March 5 (Reuters) - China will boost defence spending by 7.2% this year, slightly outpacing last year's increase and faster than the government's modest economic growth forecast, as Premier Li Keqiang called for the armed forces to boost combat preparedness.

The national budget released on Sunday showed 1.55 trillion yuan ($224 billion) allocated to military spending.

The defence budget will be closely watched by China's neighbours and the United States, who are concerned by Beijing's strategic intentions and development of its military, especially as tensions have spiked in recent years over Taiwan.

In his work report to the annual session of parliament, Li said military operations, capacity building and combat preparedness should be "well-coordinated in fulfilling major tasks".

"Our armed forces, with a focus on the goals for the centenary of the People's Liberation Army in 2027, should work to carry out military operations, boost combat preparedness and enhance military capabilities," he said in the state-of-the-nation address to the largely rubber-stamp legislature.

This year's hike in defence spending marks the eighth consecutive single-digit increase. As in previous years, no breakdown of the spending was given, only the overall amount and the rate of increase.

The spending increase outpaces targeted economic growth of around 5%, which is slightly below last year's target as the world's second-largest economy faces domestic headwinds.

Beijing is nervous about challenges on fronts ranging from Chinese-claimed Taiwan to U.S. naval and air missions in the disputed South China Sea near Chinese-occupied islands.

China staged war games near Taiwan last August to express anger at the visit to Taipei of then-U.S. House Speaker Nancy Pelosi.

Li Mingjiang, associate professor at S. Rajaratnam School of International Studies in Singapore, said defence spending outpacing the economic growth forecast showed China anticipates facing greater pressures in its external security environment, especially from the United States and on the Taiwan issue.

"Chinese leaders are clearly intensifying efforts to prepare the country militarily to meet all potential security challenges, including unexpected situations," he said.