US Secretary of State Condoleezza Rice - by coincidence in Israel on the same day as Chinese Foreign Minister Li Zhaoxing - appeared to accept the apology, saying she was confident the two "partners" would overcome the rift.

Foreign Minister Silvan Shalom insisted Israel had "acted in good faith" amid continued fallout from a deal to upgrade Harpy Killer drones which Israel sold to China.

"I regret that these sales could have damaged the interests of the United States, but we were acting in good faith," Shalom told public radio before meeting Rice in Jerusalem.

Following her discussions with Israeli Prime Minister Ariel Sharon and Shalom, the top US diplomat suggested progress had been made on the fallout.

"I think everyone knows our concerns with arms sales to China ... I appreciate that the Israeli government has been working on this issue," she told a news conference.

"I believe the Israelis now understand our concerns and I am certain as good partners can ... we will come to strong resolutions that allow us to proceed."

Israeli foreign ministry spokesman Mark Regev also said he expected the rift to be cleared up.

"As far as I know there is an understanding that these things will be behind us soon," he told reporters. It is "our hope that we'll make arrangements with the United States" to resolve the matter, he added.

But Regev would not say whether such arrangements would entail a complete halt to Israeli dealings with China or the possibility of case-by-case approval by the United States on Israeli arms deals.

Rice only last week indicated her unhappiness with Israel over its transfer of military equipment and technology to China, despite rounds of what she called "very difficult" discussions.

The Pentagon has confirmed imposing some restriction on arms sales and technology transfers to Israel following the drones deal.

The row has cast a rare shadow over Israeli-US relations, with the influential chairman of the Knesset's foreign affairs and defence committee, Yuval Steinitz, describing the situation as a "crisis".

After his talks with Rice, Shalom then met, played and lost at ping-pong to Li whose visit to the region is a further sign of Beijing's deepening involvement in the quest for peace in the Middle East.

A spokesman for the Israeli foreign ministry said the arms sale was not raised during the talks, which instead focused on trade, before the match -- an echo of the "ping-pong diplomacy" conducted between Beijing and Washington in the 1970s.

The Chinese foreign minister is also set to meet with Palestinian leader Mahmud Abbas in the West Bank town of Ramallah on Monday. Abbas was in Beijing last month while Shalom also visited the Chinese capital late last year.

Shalom earlier hailed what he called a "huge improvement" in relations between Israel and China, but issued a veiled warning to Beijing to soften its traditional pro-Palestinian stance.

"Any country that wants to get involved in the peace process should take balanced positions vis-a-vis the Israelis and Palestinians," he said.

China, a permanent and veto-wielding member of the UN Security Council, only forged diplomatic ties with Israel in 1992.

Beijing called in December for a special conference on the Middle East under the direction of the United Nations.

All rights reserved. � 2005 Agence France-Presse. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by Agence France-Presse. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of Agence France-Presse.

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