The defense ministry has drafted the five-year project called "Chui Feng" (Pursuing Wind) and plans to submit it to parliament for approval later this year, the Liberty Times said.

The Hsiung Feng III missiles, designed to cruise at a maximum speed of mach 2.0 with a range of up to 130 kilometers (78 miles), would be installed on frigates and patrol boats, it said.

Developed by the military-run Chungshan Institute of Science and Technology, the missiles would be used to fend off Chinese attacks supposed to be launched from the Varyag -- a stripped-down former Soviet aircraft carrier bought by China -- should war break out in the Taiwan Strait, the paper said.

Taiwan would become the third country in Asia to be armed with supersonic anti-ship missiles, the paper said.

According to a previous report in Jane's Defense Weekly, 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.

The defense ministry declined to comment on the newspaper report.

A military expert said Taiwan had been working on the missile project but while China had plans to operate an aircraft carrier, the ageing Varyag was unlikely to meet its demands.

The "condition of Varyag is horrible. It could only be used for training and study purposes," Wendell Minnick, Asia Bureau chief of the US-based Defense News weekly, told AFP.

"They will have to build a new one on their own as they attempt to operate a project force which can strike targets beyond their territory," he said.

It was not clear when China would commission its first carrier, but Minnick said it was not likely to be anytime soon.

"In the United States, building an aircraft carrier may take five to 10 years... but China lacks such experience. It may even longer," he said.

China has repeatedly threatened to invade Taiwan should it move towards formal independence, prompting the island to seek more advanced weaponry.

Beijing announced in March its military budget for this year would rise 14.7 percent to 35 billion US dollars.

A Pentagon report last year estimated that China's defense spending was two to three times the publicly announced figure and that the cross-strait military balance was tipping in Beijing's favor.

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