Taiwan on Tuesday launched its largest ever missile ship Tuesday as the island strives to modernise its armed forces in response to a perceived threat from China.

The 500-tonne corvette named 'Tuo Chiang' -- 'Tuo River' -- is the first of its kind ever produced by Taiwan and was touted by defence minister Yen Ming as "the fastest and most powerful" in Asia.

Armed with 16 missiles including eight supersonic Hsiung-feng III (Brave Wind) anti-ship missiles, it will boost Taiwan's defence capabilities against its giant neighbour, which considers the island part of China's territory awaiting to be reunited by force if necessary.

"From now on, the navy's combat capabilities will reach a crucial milestone, Yen said at a launch ceremony held in the port of Suao, in northeastern Yilan county.

"The completion of the new generation of naval warship is expected to ensure security in the Taiwan Strait and protect shipping lanes," he added.

Vice Admiral Wen Chen-kuo told AFP that "the supersonic missile is very difficult to intercept"

The sleek twin-hulled ship uses stealth technology to reduce the reflection of radar waves, making it harder to detect, with a maximum speed of 38 knots per hour and a range of 2,000 nautical miles (3,704 kilometres).

It set sail briefly Tuesday to show its capabilities to reporters before returning to the port again.

The corvette is scheduled to be deployed in Taiwan waters after further tests and is the prototype of up to 11 others to be built by the navy.

Its launch comes after the US Congress passed a bill last week authorising President Barack Obama to transfer up to four Perry-class guided missile frigates to Taipei.

China slammed the deal, saying a diplomatic protest had been lodged with the US.

"We are firmly opposed to arms sales to Taiwan by the US," said Chinese foreign ministry spokesman Qin Gang.

Ties between Taiwan and China have eased markedly since Ma Ying-jeou of the China-friendly Kuomintang party came to power in 2008, ramping up trade and allowing in more Chinese tourists.

But Beijing still refuses to renounce the use of force, even though Taiwan has been self-governing since the end of a civil war in 1949, prompting the island to continually modernise its armed forces.