TAIPEI, Aug 25 (Reuters) - Taiwan unveiled a proposed 12.9% year-on-year increase in its defence budget for 2023 to T$415.1 billion ($13.72 billion) on Thursday amid tensions with China, which has sharply increased military activities near the democratically governed island.

China, which claims Taiwan as its territory despite the strong objections of the government in Taipei, carried out its largest-ever military exercises around the island after a visit this month by U.S. House Speaker Nancy Pelosi.

On top of the proposed budget, Taiwan President Tsai Ing-wen's Cabinet is proposing an additional T$108.3 billion in spending for fighter jets and other equipment.

The proposal, which is a record high and must be approved by parliament, marks the island's sixth consecutive year of growth in defence spending since 2017.

The island last year announced an extra defence budget of $8.69 billion by 2026, which came on top of its yearly military spending, mostly on naval weapons, including missiles and warships.

Tsai has made modernising the armed forces - well-armed but dwarfed by China's - a priority.

China has not ruled out using force to bring the island under its control. Taiwan rejects Beijing's sovereignty claims, saying that the People's Republic of China has never ruled the island and that only Taiwan's people can decide their future.