"China has neither the wherewithal nor the intention to enter into an arms race with any country and China does not and will not pose a threat to any country," he said.
The announcement was made a day before the annual session of China's national parliament begins.
However China's increasing defence investment has worried some in the US with Dick Cheney, the vice president, saying on a recent visit to Asia that China's anti-satellite missile test in January and its military buildup were "not consistent with Beijing's stated goal of a 'peaceful rise'".
The rise comes after a 14.7 per cent increase in China's defence spending in 2006, when the official defence outlay reached $36.6bn.
However, to put the budget in context the US, will budget $440 billion for its military this year and that figure does not include seperate congressional allowances for the wars in Iraq and Afghanistan.
That is 10 times waht China will spend in 2007 and accounts for half of the world's entire military budget.
Jiang said China has always pursued "co-ordinated development of the national economy and national defence" and some experts say that emerging powers such as India and China have only increased military expenditure in relation to their growing economies.
The defence outlay represented 7.5 per cent of this year's total planned budget, he said.
China is seeking to modernise its huge but often poorly equipped military forces by building or buying new ships, missiles, fighter planes and other armaments to enable Beijing to extend its strategic reach, and also maintain pressure on Taiwan, the self-ruled island that China says must accept eventual reunification.
Jiang said the increased spending would be used to raise salaries and benefits for military personnel and to boost the military's defensive combat capability using hi-tech systems.
Jiang noted that China's defence spending was modest in comparison with other major countries, both in absolute terms and as a share of GDP or the total national budget.
He said China's defence spending as a share of the national budget in 2005 stood at 7.3 per cent. That compared with 20.04 per cent for the US, 11.41 per cent for France and 9.2 per cent for Germany.
Experts have estimated that China's true spending on the PLA may be up to three times more than the official figure, although Jiang stressed that the recent increases were "compensatory" boosts to make up for China's weak national defence foundation following a decade of decreasing expenditures between 1979 and 1989, when expenditures fell by 5.8 per cent annually.