Report says US company to build subs

A US company is to build eight German-designed conventional submarines for Taiwan despite pressure from China, a report said yesterday.

"The US government has notified Northrop Grumman to discuss with Taiwan the type of submarine it is to buy, the price of the arms deal and other details of the contract," the China Times quoted a military source as saying.

The navy reportedly favors the German 209-class submarine built by Howaldtswerke Deutsche Werft AG (HDW) shipyard.

The paper said recent signs suggested the deal would go through despite pressure from China.

The German business daily Handelsblatt said Northrop Grumman plans to buy a 20 percent stake in HDW after US-based One Equity Partners (OEP) acquired 75 of HDW.

OEP has announced a tie-up with Northrop Grumman, the China Times said.

However, German Chancellor Gerhard Schroeder said on Monday that a change in ownership of HDW would not affect Germany's "one China" policy or its ban on arms exports to Taiwan.

Berlin recognizes Beijing rather than Taipei.

The Ministry of National Defense has declined to comment on the report in either the China Times or the German paper.