China said a possible meeting between U.S. President Barack Obama and the Dalai Lama would further hurt Sino-U.S. relations, and vowed to go ahead with sanctions against U.S. companies selling arms to Taiwan.

China has become increasingly assertive in opposing meetings between the Dalai Lama and foreign leaders, and a meeting between the exiled Tibetan leader and Obama would add to the litany of troubles between the world's biggest and third biggest economies.

Relations between the United States and China have soured over a range of issues from trade and currency policies to control of the Internet.

There has been widespread speculation that Obama will meet the Dalai Lama when the Tibetan Buddhist monk visits the United States in coming months. The White House has not publicly confirmed any such meeting.

Zhu Weiqun, a Vice Minister of the United Front Work Department of China's ruling Communist Party, said his government would vehemently oppose any meeting between Obama and the Dalai Lama, who Beijing deems a dangerous separatist.

If that comes to pass, then China will be strongly opposed as always, Zhu, who's department steers Party policy over religious and ethnic issues, said of the possible meeting.

A meeting would be totally at odds with international accepted practices and would seriously undermine the political basis of Sino-U.S. relations, added Zhu.

If the U.S. leader chooses this time to meet the Dalai Lama, that would damage trust and cooperation between our two countries, and how would that help the United States surmount the current economic crisis? said Zhu.

China routinely opposes meetings between the Dalai Lama and foreign leaders, especially after violent unrest spread across Tibetan areas in March 2008. Previous U.S. presidents have met him.

The Dalai Lama has said he wants a high level of genuine autonomy for his homeland, which he fled in 1959. China says that his demands amount to pressing for outright independence.

China recently hosted talks with envoys of the Dalai Lama, but those talks achieved little.

TAIWAN ARMS SALES

Even a brief symbolic encounter between the U.S. leader and the Dalai Lama would stoke ire in Beijing, already angered by U.S. proposals last week to sell $6.4 billion of weapons to Taiwan, the disputed island that China treats as an illegitimate breakaway province.

Chinese Foreign Ministry spokesman, Ma Zhaoxu, on Tuesday repeated Beijing's threat to impose sanctions against U.S. companies which sell arms to Taiwan.

The concerned U.S. companies have ignored China's opposition and insisted on selling weapons to Taiwan. China will impose corresponding sanctions on companies that sell weapons to Taiwan, Ma said told a news conference.

The United States actions will seriously hurt China's core interests and seriously hurt China-U.S. interests, he said. This will unavoidably affect China-U.S. cooperation on important international and regional issues.

On Friday, the Obama administration said it would sell a package of $6.4 billion of missiles, helicopters and other military hardware to Taiwan.

China then said U.S. companies involved in selling the arms to Taiwan would face corresponding sanctions.

Companies that could be affected include Sikorsky Aircraft Corp, a unit of United Technologies Corp; Lockheed Martin Corp; Raytheon Co; and McDonnell Douglas, a unit of Boeing Co.

China says the dispute will damage cooperation with the United States over international issues. Washington has sought stronger Chinese support over several hotspots, chiefly the nuclear ambitions of Iran and North Korea.

The United States switched diplomatic recognition from Taipei to Beijing in 1979, recognizing one China. But it remains Taiwan's biggest backer and is obliged by the 1979 Taiwan Relations Act to help in the island's defense.

(Writing by Jeremy Laurence; Editing by Alex Richardson)

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