"Research and development of the armoured vehicle has been underway," army spokesman major general Hsiao Ju-po told reporters.

"Mass production of the new vehicle will not begin until it passes tactical evaluation... Mass production is slated for 2007," he said, without providing details of the new weapons system.

The United Daily News said Monday the first model, which is similar in design to the French-made Piranha armoured vehicle, would be completed in February.

The new armoured vehicles would replace some 700 vintage M-41 tanks, while M48-Hs and M60-A3s would remain the backbone of the army's tank force, the paper said.

It said the weapons procurement project could cost the army up to 36 billion Taiwan dollars (1.05 billion US).

The completion of the eight-wheeled prototype marked an end to a long-standing debate in the army over whether the next generation of armoured vehicles should be tracked or wheeled, the daily said.

Military experts said the choice would suggest that mobility has been given top priority while the army weighs its armaments plan.

In a military reform plan that ended in 2001, the Taiwanese military cut its troop numbers but reinforced their mobility and firepower in the face of what is perceived as a growing Chinese military threat.

China has repeatedly threatened to invade Taiwan should the island declare formal independence.

WAR.WIRE