China to Boost Military Spending : Budget: Beijing pushes modernization, saying its equipment, technology lag behind developed nations.

TIMES STAFF WRITER

China will boost its military modernization program through higher government spending on defense this year, Finance Minister Liu Zhongli announced Tuesday.

The 1993 defense budget will jump 14.7%, Liu said in a report to China's rubber-stamp Parliament, the National People's Congress. After adjustment for inflation, that would be an increase of about 8.2% in real terms, bringing officially acknowledged defense spending to $7.4 billion.

The budget announced Tuesday marks the fourth consecutive year of increased defense spending after a period in the mid-1980s when army manpower was cut and inflation-adjusted military spending dropped.

The policy reversal, which came after the country's top leaders called on the army to crush the 1989 Tian An Men Square pro-democracy demonstrations, was initially seen by foreign analysts as a reward to the army and an attempt to buy its continued political support.

But the modernization is also driven by Chinese alarm over the United States' high-technology fighting capabilities revealed during the 1991 Persian Gulf War, and a desire by China to boost its status as a regional power.

"Both the arms and the equipment of the Chinese army are rather backward," Xu Xin, 72, a Congress delegate who recently retired as deputy chief of the army's General Staff, told the official China News Service. There is still a big gap between China and developed countries of the world in this respect.

"In this situation, the state should well appropriate more funds to national defense in order to improve and renew arms and equipment," Xu said. "Should we delay giving thought to this issue, we would certainly suffer losses."

Spending on defense last year, as in most fields, exceeded budget. This year's proposed military budget is 12.5% above last year's actual expenditures. Cost overruns are likely again this year.

In per capita terms, China's acknowledged annual military spending remains modest: about $6.40 per citizen. But Western analysts say real defense spending is about double the officially reported amount. Some of the additional funding is believed hidden in other parts of central and provincial government budgets. Funds also come from arms exports and the sale of civilian products made at military factories.

It is not clear just whom China might be preparing to fight. But it has vociferously asserted claims to sovereignty over the South China Sea's Spratly and Paracel islands, parts of which are also claimed by several Southeast Asian nations. Beijing also has consistently refused to rule out the use of force against Taiwan, which it views as a breakaway province.

The Chinese government has shown concern in recent months over growing perceptions in neighboring countries and in the United States that its military buildup may pose a threat.

During a February meeting with former Secretary of State Alexander M. Haig Jr., who was in China on a private visit, Premier Li Peng complained about foreign charges that China is building an army "seemingly beyond the mere size for defense" and even "starting to acquire a capability for aggression," the official New China News Agency reported.

In other action at Tuesday's legislative session, Luo Gan, secretary general of the State Council, or Cabinet, presented a government restructuring program aimed at freeing broad areas of industry from direct governmental management.

Under the reform, to be carried out this year, various government agencies that in the past ran factories under central planning will be converted into highly autonomous government-owned corporations, Lu said. This reform is part of China's effort to build a "socialist market economy," he said.

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