Chinese Navy vessels during a military exercise.Photo: AFPBarrister Harun ur Rashid

China's official defence spending will rise by 11.2% in 2012, pushing it above $100bn for the first time, the government has announced.

Beijing's defence budget has risen each year for two decades to become the world's second-biggest, behind the US. But the US budget is seven times more than the Chinese budget and has bases housing thousands of American troops across the region.

Announcing the new budget, Li Zhaoxing, an official with China's parliament, sought to calm concerns over the spending programme. "China is committed to the path of peaceful development and follows a national defence policy that is defensive in nature," he said.

China has 1.3 billion people, a large territory and long coastline, but the defence spending is relatively low compared with other major countries. But foreign experts have estimated that Beijing's actual military spending could be as much as double the official budget. The armed forces, known as the People's Liberation Army, boast more than two million personnel - the biggest military in the world.

China is developing a range of capabilities linked to the space and cyber domain in order to sidestep the overwhelming might of the US military in the Pacific region.

China recognised almost two decades ago that in the mid-term the PLA could be no match for US conventional forces. So it began working on what was dubbed "unrestricted warfare" - combining multiple methods to defeat a superior opponent.

The PLA has been running military projects mirroring these civilian acquisition ventures. Sometimes involving dual-use technologies, the military and civilian strands have often been indistinguishable. At the same time party leaders launched adventurous civilian acquisition projects in the high-tech domain to increase Chinese competitiveness and to boost indigenous production capabilities.

China's space programme is a case in point. The recent successful docking maneuver between a Shenzhou module and the Tiangong Space station is as much a triumph for the PLA as it is for China's civilian space agency.

If the US ever intervene in a cross-strait clash or challenge China's maritime claims, Beijing would employ a pre-emptive "sea denial" strategy alongside its conventional operations - preventing US battle carrier groups operating in or near its claimed territorial waters.

Its submarine-launched ballistic and cruise missiles are now a lethal force. China's long-range nuclear weapons systems have also undergone significant upgrades and its strategic rocket force, the Second Artillery Corps, is very much the pride of the PLA.

One of the most pressing concerns for the US navy is the threat posed by a "carrier killer" anti-ship missile with enhanced targeting capabilities facilitated from space. China very recently launched its own Beidou Positioning System, challenging the monopoly of the US Global Positioning System (GPS).

In recent years the PLA has demonstrated impressive new capabilities at sea and in space, aimed at showcasing the success of its modernisation effort.

One of the PLA's most sensitive advances has been the secret deployment and testing of advanced anti-satellite (ASAT) and Anti Ballistic Missile (ABM) weapons systems.

Two years ago, China successfully intercepted one of its own ballistic missiles as it streaked through space. This test coincided with the Pentagon's sale of Ballistic Missile Defence (BMD) Patriot systems to Taiwan.

Some experts believe a Chinese ASAT campaign against a careful selected group of US satellites could have catastrophic effect on the US military.

This capability, combined with the potential for China to develop its own Ballistic Missile Defence umbrella, suggests that the space domain will be a new theatre for US-China rivalry.

Chinese ASAT capabilities are not exclusively reserved for "kill vehicles", like the one which obliterated an ageing Chinese weather satellite in 2007. It is now believed that the successful 2007 "kill" was in fact the third test in a series. Previous tests had demonstrated an ability to maneuver in proximity to targeted satellites.

The obvious message is to deliver a powerful warning if Taiwan were to declare formal independence. But Pentagon planners are now concerned that the Taiwan contingency has been eclipsed by China's broader maritime territorial claims and demands for more international space to protect the arteries feeding China's growth.

In addition to its "sea denial" and space warfare strategies, China is also expanding its conventional capabilities. The PLA Air Force in recent years has extended its ability for offshore operations, enhancing an offensive capability. It is planning an overhaul of its ageing fleet with the deployment of over 3,000 new aircraft.

For the most part China has relied on copying Russian fighter technology. However, the roll-out of the Chengdu J-20 Stealth fighter prototype raised eyebrows last year, carefully timed to coincide with a visit by the US defence secretary.

There have been some very significant developments in the deployment of Chinese submarines in recent years. Beijing possesses 10 Russian-built ultra-quiet Kilo class submarines possibly armed with 200km-range anti-ship cruise missiles.

Since 2006, when a Chinese submarine surfaced undetected within torpedo range of the US aircraft carrier USS Kitty Hawk, China's submarine force has regularly marauded the US Navy and its allies in the Pacific.

It is thought that China plans to build three aircraft carrier battle groups, each armed with 40 fighters, up to eight warships, three nuclear-powered attack submarines and a number of support vessels. The PLA Navy's retrofitted Varyag carrier, currently under sea-trials, will serve as a training platform.

Even if the aircraft carrier would likely be a prestige piece and more directed at Chinese domestic pride, the prospect of a Chinese aircraft carrier will certainly cause ripples for the broader East Asian naval balance.

China's emerging military might has especially worried its near neighbours. China has long-running territorial disputes with Vietnam, the Philippines in South China Sea and has also positioned hundreds of missiles for a potential attack on Taiwan, which it views as part of its territory.

The US promised to bolster its presence in the region last year, in a move seen as countering China's dominance. Martin Patience in Beijing says Chinese officials remain wary about growing American influence in the region, and believe Washington wants to encircle China.

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