The finance ministry previous year said the defense budget would top 1 trillion yuan ($145 billion) for the first time, after the exact figure was initially kept out of public documents released at the start of the annual legislative sessions.
It will create a transparent, stable and predictable business environment for foreign investors and protect their rights and interests, ensuring that they enjoy national treatment and a fair market, he said.
Every year, the spokesman of the National Peoples Congress (NPC), unveils the country's defence budget in terms of percentage. The country will also attract more foreign talent, Li said, according to Xinhua news agency.
The budget deficit target cut was the first in years, suggesting Beijing will be more watchful of fiscal spending as China advances its fight against financial risks.
Diplomats say China's defence numbers probably underestimate true military spending for the People's Liberation Army, the world's largest armed forces, which are in the midst of an impressive modernisation programme overseen by Xi.
Chinese experts told The Straits Times that while China's neighbours may worry about increased military spending, it has to be seen in context.
The U.S. Defense Department did not immediately respond to a request for comment on the increased spending by its main strategic rival in Asia.
While China's military budget is the second-largest in the world after the USA, defense spending stands at roughly 2 percent of GDP.
This year's defence budget comes to about 1.3 per cent of last year's GDP of 82.7 trillion yuan ($12.4 trillion).
China's defence budget takes up a smaller share of its gross domestic product (GDP) and national fiscal expenditure compared with other major countries, said Zhang Yesui, spokesperson for the first annual session of the 13th NPC, at a press conference on Sunday.
Beijing considers self-ruling Taiwan to be a breakaway province that will eventually be part of the country again, though many in Taiwan want a separate nation.
However, a State Department official said on condition of anonymity that "we continue to carefully monitor China's military developments and to encourage China to exhibit greater transparency with respect to its capabilities and intentions".
Chinese Navy also expanded its global reach with flotilla ships sailing through the far-off oceans to expand China's influence.
The number of PLA officers was also reduced by 30 percent.
China's announcement of growth target comes at a time when it has been engaged in a trade conflict with the United States after President Donald Trump said he would impose hefty tariffs on imported steel and aluminium to protect USA producers.
In the air, China last month said it had begun equipping combat units with its J-20 stealth fighter jet, the country's answer to fifth-generation jets such as the U.S. F-22 and F-35.
But Chinese officials and analysts played down the threat.
China's military planners have also taken note of the USA shift this year in its threat analysis from terrorism to rivals Russian Federation and China, said Yue Gang, a retired colonel and military analyst.