The British financial daily quoted unnamed Pentagon officials who said the US would likely withdraw government backing for measures to improve military technology transfers to European countries if the European Union begins to sell arms to China.

At a Brussels summit on December 17, EU leaders declared their "political will" to lift an arms embargo on China, possibly by next June, while stressing that Beijing must respect human rights and regional stability.

"This has the potential to be a big brawl," an anonymous senior Pentagon official involved in Chinese policy told the FT.

"They're talking about helping the Chinese kill Americans more effectively. This is not what Europe should be doing."

Another such official told the newspaper: "If a situation arises where European systems are pointed (by China) at American personnel and platforms, one cannot just assume we're going to continue our arms sales.

"Efforts we've made to open, widen, deepen transatlantic defence industrial trade are going to be circumscribed."

EU leaders said after summit talks that they were "looking forward to further progress in all areas" of the 25-nation bloc's relationship with China, hoping for greater economic cooperation with a country whose economy has grown in leaps and bounds since the arms embargo was imposed in the wake of the 1989 Tiananmen Square massacre.

The FT said that Britain stands to be the hardest hit by any US retaliation over any EU moves to sell military technology to China.

British firms BAE Systems and Rolls-Royce are the Pentagon's two biggest suppliers.

Britain has an increasing reliance on American military technology, having won backing from the US congress three months ago for special preferred status when applying to gain access to US military technology.

EU countries like France and Germany -- both major arms exporters -- agree with China that the ban is "outdated".

But the United States argued that a resumption of European arms sales will undermine Taiwan and encourage domestic repression in the vast communist nation.

China wants access to cutting-edge technology to upgrade its weapons systems and to reduce its reliance on Russian exports, analysts said.

They said that with the US intent on maintaining its own arms embargo on China, Europe is the only other outlet capable of offering high-tech systems such as radars and sonars coveted in Beijing.

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