China plans to introduce sanctions against US defence group Lockheed Martin, a government spokesperson announced.
The measure follows the green light that the US government gave for a major arms deal with Taiwan.
That country is seen by Beijing as Chinese territory and not as an independent state.
The United States Department of State last week approved a proposal to sell Taiwan an upgrade package for its Patriot air defence systems worth hundreds of millions of dollars.
It was widely expected that this decision would bring bad blood in China. The Chinese Ministry of Foreign Affairs indicated that the arms deal is equivalent to foreign interference in domestic affairs.
The United States should, therefore, sever all military ties with Taiwan, a spokesman for the ministry said.