US Defense Secretary Donald Rumsfeld said on Saturday in Singapore China has every right to decide how to invest its resources (into the military), but urged China to explain its increased military spending to the world.

Speaking at an international security conference in Singapore, Rumsfeld said that the rest of the world also needed to understand Beijing's intentions, saying it was in its interest to "demystify" actions that others find worrying.

U.S. Secretary of Defense Donald Rumsfeld speaks during the Asia Security Summit in Singapore June 3, 2006. [Reuters]

"The only issue on transparency is that China would benefit by demystifying the reasons why they are investing what they are investing in, in my view," Rumsfeld said.

A Pentagon report last month said China was spending two to three times more on a major military buildup than the US$35 billion a year it has publicly acknowledged.

The report concluded that while Taiwan appears to be the near-term focus of China's military spending, the buildup poses a potential threat to the United States over the longer term.

China strongly resented, and firmly disagreed with, the Pentagon report, saying the reported is based on "Cold-War mentality," Chinese Foreign Ministry spokesman Liu Jianchao said at a press conference on May 24 in Beijing.

By spreading the "China threat" theory, the report has seriously violated principles governing international relations and intervened in China's internal affairs, he said. Liu noted that China is a peace-loving country and adopts a national defence policy of a defensive nature.

"It is universally recognized that China is an important force in promoting peace in the Asia Pacific and the world at large," Liu said.

At the Singapore meeting this year, Rumsfeld did not put emphasis on the US view of China as a potential threat or future military rival either in his speech or in a question and answer session with defense and security officials and experts attending the so-called Shangri-la Dialogue.

He said he thought China's first choice was a peaceful reunification of Taiwan with the mainland. But, he argued that as China's stake in the global economy grows it will face pressure to explain its behavior to the outside world.

"In life you can't have it both ways," Rumsfeld said.

"You can't be successful economically and engage the rest of the world, and have people milling around your country and selling things and buying things and engaging in exchanges, and have them at the same time worried or wondering about some mystery that they see as to a behavior that is unsettling," he said.

"If the rest of the world looks at China and sees a behavior pattern that is mysterious and potentially threatening, it tends to affect the willingness to invest," he said.

China's expenditure on national defence totalled 244.6 billion yuan (US$30.5 billion) last year, about 7 per cent of the US defence budget. The US' military expenditure per capita is 60 times that of China's, according to official statistics.