China has raised its defense budget by 12.7% - up from a single-digit rise last year - taking military spending for 2011 to $91.5 billion.
The return to double-digit hikes in the defense budget will be observed with some anxiety among China's neighbours including India and Japan which complained of Beijing muscle-flexing over core issues and territorial disputes.
The hike comes soon after the first test flight of a Chinese stealth fighter jet and plans to launch an aircraft carrier.
India, which has the world's third-largest military after the Unied States, has a defense budget less than half that of China's, its largest neighbour across the disputed Himalayan border.
This week, India hiked the defense budget by 11.6% to $36.28 billion.
China justified the rise, up from 7.5% last year, as 'far lower' than that of other nations when calculated as a ratio of its GDP.
A senior official went on record to say that China hoped to 'resolve' the boundary question.
"China's defence spending increase is far lower than 2% of its GDP. India's defence spending is far higher than 2% of its GDP," said parliamentary spokesperson Li Zhaoxing ahead of the annual session of the National People's Congress.
"At present, there are friendly and stable relations between China and India," said Li in response to a media query. "This has created a good atmosphere for the sides to resolve the boundary question through consultation."
China's GDP is three times larger than India's.