Working with a Chinese joint venture partner, Australian marine design company AMD has sold catamaran designs to China's fast-expanding navy for the Type 022 missile attack boat, first introduced in 2004.

'They would play a very big part in any military conflict in Taiwan and would pose a potent threat in coastal waters,' Mr Sam Roggeveen, formerly a senior analyst with Australia's top intelligence agency, the Office of National Assessments, said on Friday.

'We need to have a think about what is and is not in our national interest. The defence department has admitted they don't have the legislative tools to do anything about this,' he said.

The Chinese ships use a unique wave-piercing catamaran hull design and are fitted with two YJ-83 anti-ship missile launchers, allied with a structure designed to avoid radar detection.

Mr Roggeveen, now with the Lowy Institute security think-tank, said the Type 022 missile boats were integral to a massive military build-up by Beijing, which the United States has expressed concern about.

'It's all about trying to make it very difficult for the US navy to operate in coastal waters (around Taiwan),' he said.

Europe recently loosened a ban on arms sales to China which was imposed alongside the United States after the Tiananmen Square massacre in 1989.

Australian companies export about A$600 million (S$762 million) a year worth of military products. AMD has also sold catamaran propulsion designs to Beijing.

China is believed to have built as many as 40 Type 022 missile boats to replace the ageing Huangfeng class missile boat. The wave-piercing design offers high-speed and stability.

The US navy is testing similar designs.

Meanwhile, Australia's new Labor government is set to dump a troubled A$1 billion contract with US-based Kaman Corporation for navy Super Seasprite frigate helicopters, with the project running seven years late.

Rival US manufacturer Sikorsky had offered 27 off-the-shelf MH-60R Sea Hawk helicopters and the Australian navy had submitted a proposal to Cabinet ministers to accept the deal, the Australian newspaper said.

'It is a project that has been troubled and it's tens of millions of dollars and a couple of years away from delivery still,' Australian Strategic Policy Institute analyst Andrew Davies said.

The Seasprites have been plagued by software engineering problems and airworthiness issues. Australia's government has a wide-ranging review of defence purchases underway. -- REUTERS