THERE IS A REAL FEAR in some quarters that the current dispute over the sale of arms by the United States to Taiwan is likely to bring about a strain in relationships between itself and China at a time when it is most inappropriate.

Based on rumblings from China, the dispute threatens to spill over into broader international diplomacy. Washington has sought China's backing in pressuring Iran and North Korea in containing their nuclear ambitions and spearheading the six-nations talks.

Last Saturday, China bitterly denounced the Obama administration's announcement that it wanted to sell US$6.4 billion worth of weapons to Taiwan, the self-ruled island that Beijing views as an illegitimate breakaway state. The dispute deepens the rift between Beijing and Washington, already at odds over trade, currency, Tibet and the Internet.

China said it would sanction American companies that sold arms to Taiwan, a break with past practice. It threatened to impose sanctions on United States arms firms and cut co-operation with Washington unless it cancels the arms sale to Taiwan, in an unprecedented move signalling Beijing's growing global power.

"The United States will shoulder responsibility for the serious repercussions if it does not immediately reverse the mistaken decision to sell weapons to Taiwan," China's Vice Foreign Minister He Yafei told American Ambassador to China, Jon Huntsman, in comments reported on the Foreign Ministry's website.

There is no coincidence here. The United States' unemployment is now ten per cent and China's economic growth is about ten per cent. The sale of arms will be a fillip to United States industry. The net result is that American populism is now colliding with Chinese pride.

In addition, the fevered political climate created by upcoming mid-term elections in the United States means that the world's most important bilateral relationship is headed for real turbulence this year. United States President Barack Obama cannot be seen to be capitulating to Chinese pressure.

China's threat to impose sanctions on United States arms firms and cut cooperation with Washington unless it cancels the arms sale to Taiwan is an unprecedented move and signals Beijing's growing global economic power.

There have been no signs Beijing will try to use its huge pile of United States dollar assets to pressure Washington, or impose broader trade penalties - both steps that could undercut China's own economic strength, as it needs the American market.

Reunification of Taiwan with the mainland has been China's earnest desire, and thus it views such upscale military procurements as a gross intervention in its internal affairs which could derail efforts for a strategic partnership with the United States.