Turkey has alarmed fellow NATO members by raising the prospect of handing China a multi-billion dollar missile contract, yet the long-running saga is far from over and Ankara may just be trading for a better deal.

Turkey, NATO's only Muslim member, entered discussions in 2013 with the China Precision Machinery Export-Import Corporation (CPMIEC) over its first anti-missile system, a contract worth $3.4 billion (3 billion euros).

French-Italian consortium Eurosam and US-listed Raytheon Co have also submitted offers, but several recent statements by Turkish officials have indicated the Chinese may be the front-runner.

Defence Minister Ismet Yilmaz, in a written answer to a parliamentary commission, sparked speculation that CPMIEC was the winner by saying no new official bid had been received from rivals and its system could be used without integrating with NATO systems.

Yet there are serious concerns over the compatibility of CPMIEC's systems with NATO missile defences, as well as strategic worries about a key member of the military alliance concluding such a big deal with Communist-ruled China.

Other officials said talks were continuing with all bidders.

"This is not a done deal," said Sinan Ulgen, visiting scholar at Carnegie Europe in Brussels.

"It is totally wrong to assume that Turkey made its final decision to buy missile defence systems exclusively from China. American and European firms are still in the game," he told AFP.

Nihat Ali Ozcan, security expert at the Ankara-based TEPAV think tank, said Turkey was doing all it could to secure a better deal by promoting the Chinese bid.

"Talks are continuing at the bargaining table. We are talking about a lucrative deal," he said. "In my opinion, the Europeans and the Americans are the frontrunners, not the Chinese."

- 'Harmony important' -

NATO says missile systems within the alliance must be compatible with each other and has urged Ankara to take this factor into account.

"It is up to each nation to decide what military capabilities they acquire," a NATO official told AFP.

"We have to look into the particulars of what our Turkish allies have decided and whether this decision is final," the official said.

"It is important for NATO that the capabilities allies acquire can operate together."

Turkish presidential spokesman Ibrahim Kalin insisted Turkey would make the missile system harmonious and integrated with NATO infrastructure.

But analyst Ulgen said that while the Chinese system could be integrated with Turkey's national defence system it would be "half blind" due to compatibility issues.

"How can you expect NATO's radar system in Kurecik in eastern Turkey to work at full capacity with a would-be Chinese system integrated into Turkish defence architecture?" said Ulgen. "It would be a paradox."

What is not a paradox is that the Chinese are offering very favourable terms, including joint production, which is key element of any deal as Turkey wants to build its own long-range air defence and anti-missile architecture to counter enemy aircraft and missiles.

"China is a strong candidate and in a more advantageous position compared to other bidders," a Turkish government official told AFP, saying the Chinese offer was half the price and came with technology sharing.

The issue has also come to a head as worries grow about the country's future orientation under President Recep Tayyip Erdogan, with Turkey's historically strong ties with the West showing signs of severe strain.

Selecting a Chinese company that has been hit by a series of US sanctions over the past decade following accusations it sold arms and missile technology to Iran and Syria in defiance of an embargo would be unlikely to go down well with NATO partners.

US embassy officials in Ankara told AFP they would "not speculate on China's bid status, but understand the overall selection process is ongoing."

- Shadow of anniversary -

Commentators have also suggested Turkey may not select a winner for its contract before April 24, the 100th anniversary of mass killings of Armenians in World War I.

Turkey could use the deal as a card to prevent the West putting pressure on Ankara to recognise the killings as a genocide and adopting tough positions on the highly sensitive issue.

"Turkey is trying to secure a better deal not only commercially but also politically," said Ozcan.

France angered Turkey in 2012 when it pushed ahead with a contentious bill to criminalise denial of the Armenian genocide, prompting Ankara to suspend military and political cooperation with Paris. The bill was later struck down by France's top constitutional court.