China says it will raise its defence budget by 12.7% in 2011. Spending will increase to 601.1bn yuan up from 532.1bn yuan last year. The announcement comes a day ahead of the annual National People's Congress, at which the Communist Party will outline its five-year plan. China has been building up its military, causing anxiety to a number of countries in the region. Japan's Chief Cabinet Secretary says that China's modernisation of its military and increased activity is, along with insufficient transparency, a matter of concern. Relations have been strained between China and Japan over disputed isles in the South China Sea, where there are large potential reserves of oil and gas.