"The United States should clearly understand the seriousness and sensitivity of the Taiwan situation," Li told Admiral Thomas Fargo, commander-in-chief of the US Pacific Command, who is in Beijing for talks.

"Only in so doing can the steady development of Sino-US relations and peace and stability across the Taiwan Strait be maintained," he said according to the Xinhua news agency.

Li said arms sales to Taiwan should be halted and the US must "stop its relevant military exchanges aiming to upgrade the substantial relationship with Taiwan", according to Xinhua.

Fargo responded that the United States, regarding China as its partner, had "noted" the Chinese concerns on the Taiwan issue, the agency reported.

"President Bush has reiterated time and again that the United States will stick to the one-China policy," Fargo was quoted as saying, referring to Beijing's position that there is only one China, and Taiwan is part of China.

Fargo is in China to meet with senior defence officials just days after the State Department urged China and Taiwan to ensure military exercises both sides are conducting are not provocative.

His trip follows a visit to Beijing by National Security Advisor Condoleezza Rice, whose talks with China's leaders were dominated by Taiwan.

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 were imminent, the pro-Beijing Wen Wei Po newspaper said Friday.

Earlier reports in Beijing-backed Hong Kong newspapers said the war games had already started.

Wen Wei Po, long used as mouthpiece for China's sabre-rattling towards Taiwan, said the drill was named "212 project trial" and would showcase nearly all of China's advance weapons.

Beijing has said it would use the exercise to demonstrate its ability to dominate air space over Taiwan, an essential element in any invasion.

The paper added that "tens of thousands" of troops were participating in a separate military exercise in the seas around Zhangzhou port, also in Fujian province, in which a large quantity of civilian ships have been commissioned.

In Taiwan, the military has held anti-amphibious landing drills in its southern costal towns, designed to demonstrate its readiness in the event of an attack from China.

Taiwanese fighter jets and helicopters were shown on television Thursday firing at simulated enemy troops landing on a beach along the southeastern coast of Pengtung.

The United States has remained the leading arms supplier to Taiwan despite switching diplomatic recognition from Taipei to Beijing in 1979, and China is becoming increasingly edgy over US military strategy in the region, observers say.

It has repeatedly called for Washington to stop arming Taiwan, which it considers a renegade province awaiting reunification by force if necessary.

Under 25-year-old US legislation, the United States is bound by law to provide weapons to help Taiwan defend itself if its security is threatened.

Cross-strait tension has been escalating since pro-independence Taiwanese President Chen Shui-bian was re-elected to office earlier this year.

Fargo and Li Friday also exchanged views on international issues, including Iraq and the North Korea nuclear standoff.

Fargo, who is in charge of all US military air, ground and naval forces in the Pacific and Indian ocean areas, is also scheduled to meet with China's Chief of the General Staff General Liang Guanglie.

There was no immediate comment from US officials.

Fargo's swing through the region also includes stops in Mongolia, Guam and Japan.

WAR.WIRE