The value-added tax for transportation and construction industries will be lowered to 9% from 10%, as part of government efforts to reduce tax burdens on the manufacturing sector and on small and micro businesses, Xinhua News Agency reported. At the same time, it will cut social security fees paid by companies.
With this year's increase, China's defence spending moved closer to the Dollars 200 billion mark, making it the highest spender on defence after the United States.
Beijing will also pick up spending, with China's targeted fiscal deficit set to increase to 2.8 percent of GDP, from 2.6 percent a year ago.
Spending on the Communist Party's military wing, the People's Liberation Army, will rise to 1.2 trillion yuan ($178 billion), according to a separate report issued by the finance ministry.
The government aims to create more than 11 million new urban jobs this year and keep the urban unemployment rate within 4.5 per cent, in line with its 2018 goals.
Sam Roggeveen, visiting fellow at the Strategic and Defense Studies Center at Australian National University, said the budget figure marked a "substantial increase" in the size of China's military.
The impact of trade conflict has prompted Chinese CEOs to become less reliant on the United States and instead look for growth opportunities elsewhere, said Frank Lyn, PwC China and Hong Kong Markets Leader.
Further cuts to the required reserves ratio for smaller banks are planned, according to the work report.
Describing China's defence budget increase as reasonable and appropriate, Zhang Yesui, spokesperson for the annual session of the 13th National People's Congress (NPC), said the raise aims to meet the country's demand in safeguarding national security and military reforms with Chinese characteristics.
In recent years, China has rapidly constructed islands with military infrastructure in the South China Sea, where it and several Southeast Asian countries have overlapping territorial claims.
China will deepen interest rate reforms and lower real interest rate levels, he added, without specifying the type of interest rates.
President Xi Jinping's government is expected to use this year's session to announce measures to support economic growth including tax cuts and more support for entrepreneurs who generate China's new jobs and wealth.
He also responded to some countries' concerns over telecom giant Huawei, saying that it is neither fair nor ethical for USA government officials to play up so-called security risks associated with Chinese companies and link them to China's National Intelligence Law.
We will "continue to promote China-US trade negotiations", Li said, and will settle "trade disputes through discussions as equals".
Unlike in previous years, there were no targets for retail sales growth or fixed-asset investment in the reports. But the chief US envoy, Trade Representative Robert Lighthizer, said earlier the two sides still had much work to do.
China had earlier offered to buy some $30 billion in USA farm products each year as part of the possible trade deal between the two nations.