China's military insiders say the budget could increase by up to 20 per cent. Last year the budget was $200 billion.
"The Chinese Government is not only determined but capable of continuously increasing the military budget," Professor Shi Yinhong from the Renmin University of China said.
"In the arms race in the Western Pacific, China wants to close the gap with the US."
The increase will fund a massive reform program, which will make the People's Liberation Army a meaner and leaner fighting machine.
The world's largest army has cut 300,000 soldiers and money is needed to pay them out.
On top of this, to keep morale and loyalty up, President Xi Jinping will hand out a pay rise.
Most of the increase will be for advanced weapons like new missiles.