The new missile, designated Dong Hai-10 or East China Sea-10, is likely to be accurate to within 10 meters, it quoted an unidentified US defense source as saying.

The source said China already has the Ying Ji-63 cruise missile in service with a range of 400-500 kilometers, as well as Harpy unmanned aerial vehicles obtained from Israel in 2001.

These three sophisticated weapons pose new challenges to Taiwan, which has been engaged in extended debate over the missile threat from China.

"Taiwan has not met the growing LACM threat head-on," the source was quoted as saying. "Before too long, there will also be ship and sub-launched cruise missiles."

The cruise missiles would pose an additional threat to Taiwan which would already have problems defending itself against China's ballistic missiles, said Wung Ming-hsien, a professor at Tamkang University's Graduate Institute of International Affairs and Strategic Studies.

"They are cheaper and yet precise," Wung told AFP, adding that the cruise missiles could be used in any surprise attack on government installations, military commands and airbases.

But he said it might take a while for China to put Dong Hai-10 into service as it still does not have sufficient satellites to guide them.

Taiwan's defense ministry says the number of Chinese ballistic missiles targeting the island has mounted to 600 and would increase to 800 by the end of 2006.

To counter the threat it has deployed three Patriot PAC-2 anti-missile systems and is planning to acquire six more improved PAC-3 systems.

The cabinet has approved plans to spend 610 billion Taiwan dollarsbillion US) on weaponry -- including eight US-built submarines, Patriot PAC-3 anti-missile systems and submarine-hunting P-3C aircraft -- over a 15-year period from 2005.

The deal will go to parliament for approval towards the end of the year.

Since pro-independence president Chen Shui-bian was re-elected in March, Beijing has stressed its long-standing vow to take Taiwan by force should the island try to declare formal independence.

The two sides split in 1949 at the end of a civil war.

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