Australian security expert Sam Roggeveen told nine.com.au that China's military expansion remains the major factor shaping Federal Government policy.

"China is absolutely critical to shaping our defence policy in the years ahead," Dr Roggeveen, Lowy Institute director of international security, said.

Dr Roggeveen told the news channel that the modernisation and expansion of Chinese maritime forces is of particular concern for Australia.

"China now has the largest navy in the world in terms of ships, even thought some are of variable quality," Dr Roggeveen said.

China recently announced a 6.8 per cent rise in defence spending.

While the budget increase is just 0.2 of a percentage point more than last year’s growth, it is the biggest expansion in military spending in Asia, reports The South China Morning Post.

The finance ministry said funding for the military would reach 1.355 trillion yuan (US$209 billion) in 2021, while Premier Li Keqiang told the opening session of the national legislature that the People’s Liberation Army would get a training boost to improve combat readiness, the newspaper reported.