Taiwan has testfired for the first time a locally developed submarine-launched missile designed to counter the threat of China's fast-expanding navy, a report Thursday.

An unknown number of Hsiung Feng II (Brave Wind II) ship-to-ship missiles, developed by the military-run Chungshan Institute of Science and Technology, were launched during a drill late last month, the Liberty Times said.

The drill was part of the navy's five-year project to enhance the capabilities of two Dutch-built Sword Dragon class submarines acquired in the late 1980s, it said, citing an unnamed military source.

"Although Taiwan has only two combat-ready submarines, once they are armed with such missiles, they will be able to serve as a deterrent to the Chinese naval fleets," the source said.

Taiwan's navy operates a fleet of four submarines, but only the two Dutch-built ships could be deployed in the event of war. The other two were built by the United States in the 1940s.

The Ministry of Defence declined to comment on the report.

Taiwan's military has also put into service land-based and air-launched Hsiung Feng IIs which have a range of 150 kilometres (90 miles).

Tensions between Taiwan and its former rival China have reduced markedly since Ma Ying-jeou of the China-friendly Kuomintang party came to power in 2008 on promises of beefing up trade links and allowing in more Chinese tourists.

But Beijing still considers the island part of its territory awaiting reunification, by force if necessary, even though Taiwan has governed itself since China's civil war ended in 1949, prompting Taiwan to continue modernising its armed forces.

Analysts say the missile will give the two subs beyond-vision striking capability that could be used to offset the threat of China's naval fleet which has undergone rapid modernisation to make it the world's second-biggest.