Turkey has cancelled a multi-billion-dollar deal with China to build its first anti-missile system that had alarmed Ankara's allies in NATO, a Turkish official said on Sunday.

"The deal was cancelled," the official from Prime Minister Ahmet Davutoglu's office told AFP.

"One of the main reasons is that we will launch our own national missile project," added the official.

The news came as Turkey hosted key Western allies including US President Barack Obama but also Chinese leader Xi Jinping for the summit of G20 top economies in the Mediterranean resort of Antalya.

Turkey entered negotiations in 2013 with the China Precision Machinery Import-Export Corporation (CPMIEC) to finalise a contract worth $3.4 billion (3 billion euros).

French-Italian consortium Eurosam and US-listed Raytheon Co had also submitted offers but the government had prioritised talks with the Chinese company, which raised serious concerns over the compatibility of CPMIEC's systems with NATO missile defences.

NATO has said missile systems within the alliance must be compatible with each other while calling on Turkey to take this factor into account.

Turkish government sources said an official announcement was expected next week.

A second Turkish official said the issue of technology transfer was one of the major stumbling blocks in negotiations with the Chinese company.

"They refused to give what we demanded," the official told AFP, without elaborating. "The talks were blocked at some point."

Although the government's current plans to build Turkish-made missile defence system, it was not immediately clear if Ankara would launch talks with the European and American contenders.

Washington was particularly irked by Turkish decision to negotiate with the Chinese company, which has been hit by a series of US sanctions for selling arms and missile technology to Iran and Pakistan.

Turkey in the past made confusing comments over its lucrative tender, with a government minister saying the Chinese company was the winner and that its system could be used without integrating with NATO systems.

But a spokesman for President Recep Tayyip Erdogan had insisted that the missile system would be harmonious and integrated with NATO defence architecture.

fo/sjw/ri

RAYTHEON