- The Pentagon has told Congress it wants to make a $2.2 billion arms sale to Taiwan.
- China has warned it will end ties with any US firm associated with the deal.
- Beijing considers Taiwan as part of China, but the U.S. has a decades-old agreement to assist the East Asian state.
Beijing has threatened to ban any U.S. firm involved in selling arms to Taiwan from doing business in China.
Last week, China asked the U.S. to cancel a planned $2.2 billion arms sale to Taiwan, accusing Washington of interfering in domestic Chinese affairs.
The Pentagon has already informed the U.S. Congress it is likely to make a major sale of arms to the East Asian state when it outlined a deal to provide tanks, anti-aircraft missiles and related equipment.
China's foreign ministry spokesman Geng Shuang reportedly told journalists in Beijing on Monday, that business ties with U.S. firms involved in the sale would be ended if the deal went through.
Jon Grevatt, senior analyst at Jane's by IHS Markit, told CNBC Monday that while China's threat would be considered by Washington, there is legal mandate for the U.S. to assist Taiwan's defense capability and this would remain a priority.
Grevatt added that China has previously threatened potential sanctions against U.S. firms but has failed to take any action.
"By making such threats China is perceived to be seeking a conciliatory gesture from the U.S. rather than further disrupting bilateral trade," said Grevatt via email.
The possible deal would include 108 M1A2T Abrams tanks and 250 Stinger missiles. The sale could also include mounted machine guns and ammunitions.
Although Geng refused to specify any U.S. companies, it is known that Honeywell and General Dynamics are the major names behind the tanks while Raytheon is the manufacturer of Stinger missiles.
Honeywell, in particular, has a burgeoning presence within China.
IHS Markit's Grevatt said any ban "could feasibly impact" companies involved in sales of non-military products to China such as within the auto and aerospace sectors.
Taiwan president Tsai Ing-Wen has visited New York in recent days, and according to the island's government website, met with several U.S. lawmakers.
During her trip, the Taiwanese president spoke by telephone with U.S. House Speaker Nancy Pelosi in a discussion that "revolved around Taiwan-U.S. relations and regional security issues."
Taiwan is officially known as the Republic of China, whereas mainland China to its west is known as the People's Republic of China. Beijing policy dictates that China will refuse diplomatic relations with any country that recognizes the island as a sovereign state.
The United States officially follows the "one-China" policy, by refusing to recognize Taiwan as a separate state. In 1982, the United States issued the "Six Assurances" — six foreign policy principles designed to reassure Taiwan that it would continue to support the island even in the absence of formal diplomatic relations.
Correction: This report has been updated to accurately identify the helicopter in the Getty photograph and correct the name of the Taiwanese president.