However, European analysts believe that, in the longer term, China wants to buy equipment from Europe to upgrade its armed forces. European suppliers could help China with 'soft' capabilities, such as communications and surveillance equipment that would enhance existing military hardware such as missiles, fighter jets and ships. China buys much of its military hardware from Russia and this arrangement is expected to continue.

China's desire to bolster its defences is thought to stem from America's increased military spending since September 11, 2001, and the Bush administration's willingness to use its superior firepower in places such as Iraq. 'From any rational perspective one has to see what China is doing as defensive in the face of stated American policy and current American supremacy,' said Dan Plesch, a British commentator on defence and security.

China is also seeking to emulate America's hi-tech military after seeing it in action in Iraq and Afghanistan. 'What the Chinese have been doing over the past couple of years is transferring from a manpower-heavy military into more of a technology-based military,' said Andrew Kennedy, head of the Asia programme at the Royal United Services Institute. 'The future lies with ... the use of computers, satellites and technology to improve your capabilities, rather than flooding the battlefield with manpower.'

The Europeans are drawing up the new code of conduct, which they claim will prevent increases in arms sales to China. The British government has even claimed the new code of conduct could be tougher than the existing embargo, which is not legally binding and appears to have been circumvented. EU figures show licences for military exports almost doubled in 2003 over the previous year to Euro416 million (about $4.2 billion) despite the embargo.

Yet many analysts fear the new code will be weaker, as European governments will have difficulty agreeing what equipment should be proscribed. The difficulty stems from the fact that much of the 'soft' equipment China wants can also be used for civilian purposes.

No government wants to block innocuous civilian trade with China, but ensuring the equipment is not diverted to military use is difficult. European officials are already struggling with this dual-use issue. 'There has been a lot of discussion at the expert and technical level within the EU about what technology needs to feature on the list and the dual-use issue has been particularly thorny,' said Mr Ward.

'The risk must be if they can't reach a very clear understanding then we might end up with some sort of fudge,' he said. A fudged agreement would mean lax regulation. That would anger the US, which would like to see many dual-use items proscribed. Ironically, some American senators' desire for taking a tough line with Europe stems from suspicions that China has exploited loose US export controls to obtain sensitive technology. 'In some instances, this technology has been used to improve China's military capabilities,' according to a policy statement from the Senate's Republican Policy Committee.

Even if the Europeans do agree on a tight code of conduct, the code, like the arms embargo, is not expected to have any statutory backing, which makes it easy for member countries to flout, with little comeback.

If the code is loosely worded or poorly enforced, America can still influence Europe. Mr Bush said during his visit that if the embargo were lifted, the EU would have to 'sell it to the US Congress'. US legislators have threatened to bar the transfer of US military technology to Europe if the embargo goes.

Commercial pressure can also be applied to European defence suppliers to avoid China by US threats to withdraw their own substantial contracts. British firm BAE Systems has already decided not to export to China for fear of losing its US customers, according to newspaper reports.

Japan, which has been less vocal than the US but is also concerned about the embargo's removal, could exert similar commercial pressure, albeit to a lesser extent.

Analysts fear the lifting of the embargo could cause an Asian arms race as many in the region fear a militarily strong China might destabilise the region. '[The embargo's removal] will help further accelerate arms competition in East and South Asia, which is already pretty fierce,' said Mr Plesch.

Taiwan will be concerned by the removal of the embargo, given that China has not ruled out the possibility of taking the island by force should independence ever be declared. Some analysts believe the EU, which does not have any presence in East Asia, may not be fully aware of the sensitivity of the Taiwan issue.

'The Europeans are fairly parochial and may not be as conscious of the delicacy of the situation between China and Taiwan,' said Philip Towle of Cambridge University's Centre of International Studies. 'The US has been trying to moderate Taiwanese statements on independence and the Europeans have been conspicuously absent from that.'

Some European countries may be more conciliatory towards China due to a desire to create a counterbalance to the global dominance of the US.

Countries such as France and Germany, along with Russia and China, may believe that 'only by working together can they perhaps slow down the dominance of America', said Mr Kennedy. 'That's where a lot of the issue lies - the embargo is an indicative factor behind this development of an alternative power bloc.'

The EU has missed a golden opportunity to bring China under a key conventional arms control agreement, according to Mr Plesch. The Conventional Armed Forces in Europe (CFE) treaty, signed in 1990 with the end of the cold war, commits countries to troop and armament levels to prevent one nation having an overwhelming majority on the continent.

Mr Plesch believes the treaty could be expanded to include China and other Asian countries and help curtail armaments. 'Europe at the end of the cold war established these splendid mechanisms for controlling conventional weapons with the Russians, with the Americans involved,' he said.

'If Europe really wants to play a constructive role in the world to match its rhetoric what it could do is bring in China, the East Asian countries and the South Asians, because they have the expertise for weapons control.'

Whatever Europe's reasons for lifting the ban, Mr Bush left without managing to resolve the arms embargo issue on this trip during his meetings with various leaders.

The issue may not be as divisive as the Iraq war was with France and Germany, but it is certain to flare up again, as there was little indication as to how these differences will be resolved.