The defense ministry next year would set aside a budget for mass production of the Hsiung Feng III missile, which is expected to make its debut during the 2006 "Han Kuang 22" exercise, the Chinese-language China Times said.

Given its speed and capability of flying at low altitude, the missile would be difficult to intercept, it said.

The Hsiung Feng III is capable of cruising at mach 2.5 and has a range of up to 150 kilometers (90 miles), it said.

Once the navy was equipped with the weaponry, the island would be one of the few countries in the world to be armed with supersonic anti-ship missiles, the paper said.

The defense ministry declined to comment on the report

The missile, developed by the military-run Chungshan Institute of Science and Technology, is expected to be a match for the Russia-made SS-N-22 Sunburn supersonic anti-ship missile China has obtained, it said.

"Both missiles are close in precision and capabilities, but the Feng III is smaller, thus reducing the chance of its being detected."

According to a report in Jane's Defense Weekly last year, the Hsiung Feng III can be fitted with a variety of guidance systems and function as an anti-ship, land-attack or anti-radar missile.

Taiwan is striving to build up its missile defense capabilities to counter the military threat from China, which officials said was targeting the island with at least 700 ballistic missiles.

Taiwan's cabinet last month approved a revised arms deal with the United States worth almost 15.5 billion dollars after the previous proposal was rejected by parliament.

The arms package over a 15-year period from 2005, pending final approval by parliament, includes eight conventional submarines, a modified version of the Patriot anti-missile system and a fleet of anti-submarine aircraft.

The massive budget proposal has stirred heated debate on the island as critics said the spending could further provoke China and heighten cross-strait tensions.

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