The hike was announced by Li Zhaoxing, spokesman for the Fifth Session of the 11th National People's Congress (NPC), the top Chinese legislature, here today.
Defending the increase in defence spending, he told a press conference that the Chinese government follows the principle of coordinating defence development with economic development.
It sets the country's defence spending according to the requirement of national defence and the level of economic development, Li said China would spend 670 billion yuan (USD 106.4 billion) in 2012, he said, which is an increase of USD 14.4 billion compared to last year.
Coupled with this, China had spent over USD 100 billion on internal security last year. Compared to China's last year's budget of USD 92 billion, the neighbouring India's defence spending amounted to USD 36.28 billion.
The new defence budget would be presented to the NPC, which is starting its session here from tomorrow, for approval.
China's rapid military build-up has triggered concerns among several countries, including the US and Japan.
The US had also recently announced a defence strategy focussed on countering China's rising power.