Beijing  - China announced a record annual budget deficit of 950 billion yuan (140 billion dollars) on Thursday, as it seeks to increase spending to bolster the economy against the effects of a global slowdown.

Prime Minister Wen Jiabao said the deficit would be offset by the issue of government bonds and remained at a "safe" level below 3 per cent of China's gross domestic product (GDP).

The deficit is about three times the previous record deficit in 2003.

"The ratio of the cumulative balance of outstanding government bonds to GDP, which is around 20 per cent, is within the acceptable range of what our overall national strength can bear and is therefore safe," Wen said in his opening speech to the annual National People's Congress (NPC), the ruling Communist Party's nominal parliament.

"We will significantly increase government spending," Wen said.

"This is the most active, direct and efficient way we can expand domestic demand," he said.

An expected decline in government revenue as a result of slower economic growth and tax cuts for companies and individuals was another major factor behind the budget deficit, Wen said.

China's estimated gross domestic product (GDP) grew by 9 per cent last year, after a slowdown towards the end of the year, and some Western analysts have forecast growth as low as 5 per cent for this year.

Wen said the government believed it could still achieve its target for GDP growth by implementing a 4-trillion-yuan (586 billion dollars) economic stimulus package, which was announced in November.

NPC spokesman Li Zhaoxing said Wednesday that China planned to increase its military budget for this year by another 14.9 per cent, following similar large defence hikes in recent years.

Li defended the increase as "modest" and necessary for military modernization and to improve conditions for troops. (dpa)