March 4 (Bloomberg) -- China's military will boost its 2008 defense budget by a record 19.4 percent, upgrading the world's largest regular army's technology and resources to rival Japan, the U.S. and Taiwan.

Spending will rise to 417.8 billion yuan ($58.8 billion) from last year's 350 billion yuan, the Chinese legislature's spokesman Jiang Enzhu said today. Jiang calculated the increase to be 17.6 percent, or $57.2 billion, using the yuan's end-2007 exchange rate and comparing the 2008 budget with 2007 actual spending.

The People's Liberation Army, with 2 million soldiers, had the biggest military expenditure in five years in 2007, going on a spending spree to upgrade a missile force capable of shooting down one of the country's own obsolete satellites. Government spokesman Qin Gang said in March last year the navy would build its first aircraft carrier by 2010 to expand the defense forces' operational range into the South China Sea.

``Our purpose is to safeguard our sovereignty and territorial integrity,'' Qin said at a regular news briefing in Beijing today. ``It's justifiable for any country to maintain a reasonable level of military power.''

China's military is continuing to improve its capacity to conduct long-range missions beyond a confrontation with Taiwan, the Pentagon said yesterday in a report. The Chinese government regards Taiwan as a breakaway province.

Modernizing PLA

The PLA ``is pursuing comprehensive transformation from a mass army designed for protracted wars of attrition on its territory to one capable of fighting and winning short-duration wars along its periphery against high-tech adversaries,'' according to the report.

Much of China's modernization drive is aimed at altering the military balance between China and Taiwan in China's favor, said the congressionally mandated report, which covers 2007.

Although Taiwan has spent more on defense in recent years, reversing the trend of declining defense expenditures, ``the balance of forces continues to shift in the mainland's favor,'' the report said.

One example is the fielding of new, mobile DF-31 and DF-31A intercontinental ballistic missiles that ``are enhancing China's strategic strike capabilities,'' according to the report.

Jiang didn't disclose China's 2008 defense budget as a proportion of the economy or the government's total spending.

The PLA's 2007 defense budget was 1.4 percent of the world's fourth-largest economy and 7.2 percent of total spending, Jiang said.

That's still less than the 2007 U.S. defense budget, which was 4.6 percent of the economy or 16.6 percent of government spending, he said.

Inflation Accelerating

As a proportion of public expenditure, China's 2007 defense budget ranked behind the U.S., Russia, India and France, he said today. As a ratio of the economy, China's 2007 military spending was smaller than the U.S., the U.K., Russia, India and France, he said.

Qin from the foreign ministry said the increase in spending had to be seen in the context of rising inflation, which accelerated to an 11-year high in January. Some of the budget will be used to provide pay increases for military personnel.

``Even ordinary people have felt the impact of rising prices,'' he said today. ``Soldiers are also human and they need to eat. We have to view this issue by taking many factors into consideration.''

To contact the reporters on this story: Lee Spears in Beijing at lspears2@bloomberg.net; Zhao Yidi in Beijing at yzhao7@bloomberg.net

Last Updated: March 4, 2008 04:24 EST