BEIJING -- In an annual ritual of political pageantry, Premier Zhu Rongji launched China's legislative session Tuesday, urging lawmakers to unite in facing internal and external threats to stability.

This year's 11-day legislative session comes at a time of transition, as Zhu and other top leaders in their seventies prepare to yield power to a younger generation of leadership.

"We are facing new difficulties and severe challenges," Zhu told the nearly 5,000 delegates, a human sea of business suits, olive military uniforms and ethnic costumes gathered in the cavernous Great Hall of the People.

He cited the global economic slowdown and fierce international competition for markets as threats to economic and social stability.

With once-closed markets opening to foreign competition as China adapts to its three-month old membership in the World Trade Organization, nurturing job-creating economic growth headed Zhu's list of priorities.

The National People's Congress is a largely powerless body that usually approves unchanged ruling Communist Party decisions.

Decisions on the leadership lineup will come in closed-door conclaves in the summer and autumn, and Zhu and party leader and President Jiang Zemin are expected to retire from their current posts next March.

Meanwhile, thousands of delegates gathered to hear reports on the budget, the work of the courts and prosecutors and to learn about policies they will be backing.

On Tuesday, Zhu made it clear that with trade slowing, farm incomes stagnating and unemployment rising, the government will continue to spend heavily on public building projects, farm subsidies and support to workers laid off in the restructuring of state industry -- seeking to economic growth at a robust 7 percent.

A $169 billion budget report presented to lawmakers on Wednesday by Finance Minister Xiang Huaicheng called for a record deficit.

In the 13th straight year of double-digit increases, spending on the 2.5 million member People's Liberation Army will grow 17.6 percent to $20 billion, Xiang announced.A $170 billion budget report to be presented to lawmakers on Wednesday by Finance Minister Xiang Huaicheng calls for a record deficit.

In the 13th straight year of double-digit increases, spending on the 2.5 million member People's Liberation Army will grow 17.6 percent to $20 billion, according to a copy of the report seen in advance by The Associated Press.

The $37.5 billion deficit, a 19 percent increase over last year, is the "price we have to pay" to keep the economy growing, Xiang says in the budget report. Last year's budget deficit was $31.5 billion.

China's deficit has nearly tripled since 1999, prompting some economists to warn that the government's debt could soon reach dangerous levels.

Zhu, in his own report, contended that the debt is "still within safe limits."

Far greater threats come from endemic corruption, from crime, terrorists, religious extremists, ethnic separatists and from "sabotage by hostile forces," Zhu said, calling for a stronger military.

According to the budget report, some of this year's military spending increase will go to raising salaries for the poorly trained and equipped army. Beijing also is spending heavily on upgrading antiquated weapons technology.

"PLA officers work under very difficult conditions and are very poorly paid, so Beijing has been putting some effort into improvements in both those areas," said Robert Karniol, Asia-Pacific editor for Jane's Defense Weekly.

Karniol and other experts say China's true military spending may be as much as five times the official figure, which is not thought to include weapons purchases, research and development and other critical costs.

The normally busy square outside the session Tuesday was cleared and heavily guarded to prevent protests.

As limousines pulled away from the Great Hall after the opening session, a middle-aged man wearing a blue Mao suit ran into traffic, knelt on the street, held up a white cloth banner and began shouting. Police rushed after him and marched him out of sight.

Police also detained at least six other people in front of Tiananmen Gate on the square's north end.