In his address, Wen said it was vital to modernise the country's army to achieve national security and move towards reunification with Taiwan.

Congress is expected to pass a new law aimed at curbing any bid by Taiwan for formal independence later next week. China views Taiwan as its territory, and regularly threatens to use force if the island declared independence.

Wen also told parliament that the country would aim for a growth rate of 8% in 2005 and hoped to create 9m new jobs.

"Maintaining steady and rapid economic development is an important issue that the government must successfully handle," the prime minister told delegates.

He pledged to cut all farm taxes by next year and he set out plans for free schooling for needy children.

Parliament is expected to approve a 12% increase in its military spending, which will take official military spending to 247.7bn yuan ($29.9bn).

Wen said that making sure the army "is capable of winning any war it fights" was an "historical objective".

The increase in defence spending is the latest in a series of regular cash infusions to try to upgrade and modernise China's army.

A controversial so-called "anti-secession law" is due to be approved on Tuesday.

The legislation has been criticised by Taiwanese politicians who say it will set out a legal basis for a possible Chinese invasion of the island.