Taiwan has said it plans to upgrade its F-16 fighter jets and will seek cutting-edge stealth aircraft from the US in the face of a growing military threat from China.

Taiwan’s defence minister, Feng Shih-kuan, told lawmakers the country was focusing on inexpensive but effective “asymmetric warfare” techniques to combat threats in the air and seas. He said the budget amounted to 2.05% of Taiwan’s economy but that he hoped it would increase to nearly 3% next year.

The announcement follows the release of this year’s $11.4bn defence budget, an increase of less than 1% from last year, reflecting strains on the government’s finances resulting from a heavy entitlements burden and slowing growth in the high-tech, export-oriented economy.

That compares with China’s 7% rise in defence spending, announced this week, bringing its defence budget to about $151bn, the world’s second-largest after the US.

During Feng’s announcement, Lieutenant General Chiang Chen-chung said Taiwan’s forces are able to strike Chinese bases across the 160km-wide Taiwan Strait. When asked if that strike ability extended to bases charged with operations against Taiwan as far as 1,300km away, Chiang said yes.

China considers the self-governing island to be its own territory, to be brought under its control by force if necessary. China has threatened to attack if Taiwan declares formal independence or if it considers peaceful unification no longer achievable. The sides split during a civil war in 1949.

In a defence review released every four years that maps out challenges and strategies, the defence ministry said Taiwan faced an increased threat from the air, sea and by missiles, thousands of which China has pointed at the island. It said China’s immediate goals in a conflict would be to blockade Taiwan, use “diverse military means” to attack, and take control of outlying island groups.

The report also warned of the threat of cyber warfare, saying China has the means to attack both military and civilian networks on the island.

Without giving details, the report said Taiwan would also seek fighters able to take off vertically, more surface-to-air missiles and a revitalised navy deploying domestically made submarines and fast attack craft.

President Tsai Ing-wen’s government has renewed efforts to develop the domestic arms industry in response to difficulties in procuring weapons abroad because of Chinese diplomatic and economic pressure.