China is likely to announce a substantial increase in the military’s budget, according to analysts, amid a massive reorganisation of the PLA and increased tensions over territorial claims in the East and South China Seas. The government is expected to reveal its proposed annual budget for the world’s biggest army this Saturday, when the National People’s Congress opens its annual session. Analysts said spending was likely to be much higher due to the expense of laying off huge numbers of troops as part of the overhaul aimed at modernising and improving the efficiency of the military. President Xi Jinping announced last September a cut of 300,000 military personnel by 2017, mostly among non-combat troops. The PLA will remain the world’s biggest military force after its numbers are cut to about two million. “I think even an increase of 20 per cent would be acceptable this time, even though it would be the highest since 2007,” a source close to the People’s Liberation Army said. “A big reduction in troops doesn’t mean the PLA will cut the budget immediately as it should allocate a certain proportion of spending for retirement pay or other lay-off compensation in the coming two years.” READ MORE: China’s PLA reforms slash political posts as part of a 300,000 cut in non-combat personnel by 2017 Another source, close to the navy, said increasing tensions with China’s neighbours and the US in the East and South China seas had also prompted Beijing to increase the defence budget to boost security in the region. The US started sending warships to sail close to Chinese- controlled islets and reefs in disputed areas of the South China Sea last October. Admiral Harry Harris, the head of the US Navy’s Pacific Command, said last week that the Pentagon would increase missions in the area to exercise freedom of navigation in international waters. Beijing says the operations are a provocation and challenge its territorial sovereignty. “China should increase boosting defensive weaponry in the South China Sea, including advanced radar systems, warships, aircraft and other equipment for garrisons stationed on the remote islands, which will need a lot of money,” the naval source said. US intelligence says China has deployed J-11 fighter jets, JH-7 bombers and two batteries of HQ-9 surface-to-air missiles on Woody Island, also known as Yongxing Island, in the South China Sea in recent weeks. The navy also appears to be upgrading its combat capabilities in the East China Sea where it is locked in a territorial dispute with Japan over the Diaoyu Islands, known as the Senkakus in Japan. The PLA announced last week that it had put into service a domestic-made advanced missile frigate in the region. READ MORE: China’s military closing technology gap with the US, says American air force chief Another source close to the newly established Southern Theatre Command said the army would also give pay rises to boost morale amid unhappiness over lay-offs and the sweeping military reorganisation. “The army had a 20 to 40 per cent pay rise in January, which was decided last year,” the source said. Senior officials in the military were considering another round of pay increases around the time of the annual celebration of the PLA’s formation on August 1, which needed to be approved by the NPC, the source said. Military spending was budgeted to increase 10.1 per cent in 2015, the lowest growth rate in five years. The PLA was allocated 886.9 billion yuan (HK$1 trillion). That compares with a US defence budget of about US$597 billion last year. However, an average of double-digit increases in defence spending for the PLA over the past two decades has made other countries in the region nervous. Japan has approved its largest ever defence budget of US$41.4 billion in the coming year.