"In order to strengthen our self-defence capabilities and facilitate the modernisation of weapons and military equipment, the government has budgeted 349.5 billion Taiwan dollars (11.27 billion US) in military spending this year," Chen said.

"This marks for the first time (in many years) military spending is going to account for three percent of GDP" (gross domestic product), he told a group of military officers during a promotion ceremony in Taipei.

Taiwan's defence ministry increased its military spending to 2.85 percent of GDP in 2007, up from 2.6 percent in 2006.

Chen, of the independence-leaning Democratic Progressive Party (DPP), also demanded the military prepare for contingency plans "as the military threat and sabre-rattling from China is ever increasing".

Chen's comments came as China announced that military spending this year would rise 17.6 percent to 417.8 billion yuan (57.2 billion dollars at the end-2007 exchange rate), though it insisted the increase was moderate.

Chinese parliamentary spokesman Jiang Enzhu also warned Taiwan on Tuesday that its planned referendum this month on United Nations membership was placing peace between the two sides at risk.

"If Chen Shui-bian authorities stubbornly move down the path (to a referendum), they will pay a heavy price," he said.

Chen has defied repeated warnings from Beijing and pressed on with plans for a referendum, to be held alongside March 22 presidential polls, that calls for the island to seek UN membership under the name of "Taiwan."

The island's China policy decision-making body, Mainland Affairs Council, said China's criticism of the UN vote "shows again that Beijing attempts to mislead international society and influence the internal situation of Taiwan."

The council said Taiwan was "an independent sovereign state" and Beijing must stop interfering in its democratic process.

"China should face the reality that the two sides of the Strait have been governed separately," the council said in a statement.

As of November, China had between 990 and 1,070 short-range ballistic missiles deployed to garrisons opposite of Taiwan, as well as 490 combat aircraft within un-refuelled operational range of the island, according to an annual report released by the Pentagon Monday.

China views Taiwan as a rebel province and has threatened to retake the island by force if the territory should ever declare formal independence. The two sides split at the end of a civil war in 1949.

earlier related report
China's Hu says Taiwan independence moves 'doomed to fail'
Chinese President Hu Jintao said Tuesday Taiwan independence moves were "doomed to fail," as others in Beijing warned a referendum on United Nations membership for the island placed peace at risk.

"The 'Taiwan independence' activities have run counter to the Chinese nation's strong will to safeguard national unity," Hu told an advisory body in Beijing.

"Such activities will get nowhere and are doomed to fail," Hu said in comments broadcast on state television.

The remarks were made as Taiwan prepares for a March 22 referendum on whether the island should apply for UN entry under the name "Taiwan" rather than the official "Republic of China".

China sees this as a dangerous step away from Taiwan's formal link to the mainland, prompting a dire warning from Chinese parliamentary spokesman Jiang Enzhu earlier Tuesday.

"If Chen Shui-bian authorities stubbornly move down the path (to a referendum), they will pay a heavy price," Jiang told reporters, referring to the Taiwanese president.

Chen has defied repeated warnings from Beijing and pressed on with plans for the referendum, to be held alongside presidential polls.

Jiang called it "a serious step towards seeking de jure (legal) independence for Taiwan" that would "threaten peace and stability in the... Straits."

China views Taiwan as a rebel province and has threatened to retake the island by force if the territory should ever declare independence. The two sides split at the end of a civil war in 1949.

Jiang said that the vote on joining the United Nations was "tantamount" to a referendum on independence.

His comments came as he announced that China's military spending this year would rise 17.6 percent to 417.8 billion yuan (57.2 billion dollars at the end-2007 exchange rate).

When asked how much of China's military spending was focused on curbing Taiwan independence, Jiang insisted that Beijing was committed to peacefully reunifying with the island territory.

"But at the same time, we will make well our preparations and firmly curb the dangerous activities of Taiwan independence forces," he said. "The situation across Taiwan Straits is at a crucial stage."

Jiang was speaking to reporters ahead of China's annual session of parliament that begins on Wednesday and will formally endorse the military budget for 2008.

In 2005, China's parliament passed a Taiwan anti-secessionist law that was widely seen as setting the legal basis for a possible mainland attack on Taiwan if it should move towards independence.

Taiwan, under its official name the Republic of China, lost its UN seat to the mainland in 1971 and is now only recognised diplomatically by around 20 countries.

Taiwan has made several moves to formally join international organisations such as the UN under its official name, but this is the first time it has tried under the name "Taiwan".

In an annual report released on Monday, the Pentagon said China's military modernisation was being driven in the near-term by preparations for contingencies over Taiwan.

Although the situation in the Taiwan Straits remained stable, the balance of military power was continuing to shift in China's favour, the report said.

But Chinese foreign ministry spokesman Qin Gang said Tuesday the United States was adding to the military tensions by selling weapons to Taiwan and he called for that to stop.

"We urge the United States to... stop selling weapons to Taiwan, cease military ties with Taiwan, stop sending erroneous messages to Taiwan secessionist forces and work with China to safeguard peace and security across the Taiwan Strait," he said.

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