Taiwan said it would buy up to 20 military helicopters from a European manufacturer less than a week after Washington infuriated China by proposing a $6.4 billion arms deal for the island which Beijing claims as its own.

The Taiwan deal with Eurocopter, a subsidiary of German-based EADS, has the potential to strain China-European relations, which, like Sino-US ties, have been hurt by trade disputes and the value of the Chinese currency.

But China's initial reaction was muted. 'We understand these are rescue helicopters. We will continue to monitor the situation, especially the use of the planes,' the Foreign Ministry said in a brief statement.

European arms sales to the self-ruled island that Beijing considers a breakaway province have dried up in the past 17 years due to their political sensitivity, although EU-Taiwan trade ties are generally strong.

A French deal in 1993 to sell Taiwan advanced Mirage fighter jets angered China, prompting Beijing to close the French consulate in southern Guangdong province and cut French firms out of lucrative contracts.

China has claimed sovereignty over Taiwan since 1949, when Mao Zedong's forces won the Chinese civil war and Chiang Kai-shek's Nationalists fled to the island. Beijing has vowed to bring Taiwan under its rule, by force if necessary.

Taiwan's defence ministry spokesman, Martin Yu, said the island would buy EC-225 search-and-rescue helicopters. He provided no further details.

China has blasted the United States over a planned $6.4 billion arms package for Taiwan, saying it would place sanctions on US firms that sell weapons to the island.

'What is equally odd about the contract award is China has remained silent on the issue after it threatened to sanction US companies selling arms to Taiwan and occurs at the same time European leaders have been pushing for a lifting of arms exports to China,' Defense News reported, adding the $111 million deal would be signed in the next few days.

Europe has an arms embargo in place against China following a bloody crackdown on pro-democracy demonstrators around Beijing's Tiananmen Square in 1989. In 2005, the European Union dropped plans to lift the embargo, bowing to US pressure.-Reuters