Hu told a meeting of Communist Party leaders Saturday that China "must effectively reinforce the building of national defence so that it is in harmony with economic development," the People's Daily reported.
China recorded economic growth of 9.7 percent in the first quarter of this year.
Hu's rare statement on military matters, largely the domain of former president Jiang Zemin, came as China continued annual exercises to demonstrate its ability to dominate air space over Taiwan, which it regards as its territory.
China has been training 18,000 troops on Dongshan Island 150 nautical miles west of Taiwan and large scale joint sea, land and air drills in the area are imminent, the pro-Beijing Hong Kong-based Wen Wei Po newspaper said Friday.
Hu said China must "continue to give priority to national sovereignty and security, firmly defending the interests of the state and protecting with determination the sovereignty and national integrity of the nation."
China's defence budget for 2004 is 11.6 percent higher than that for 2003, after hikes of 9.6 percent in 2003 and 17.6 percent in 2002.
The budget was officially raised to 22.37 billion dollars in 2003, but Western experts believe it is actually two to three times as high.
China regards Taiwan as part of its territory waiting to be reunified, by force if necessary. The two sides split at the end of a civil war in 1949.