China will complete a deal with Boeing this month to buy 36 Boeing planes valued at between $1bn and $2bn (�1.38m), officials said on Tuesday, in a sign that Sino-US relations were improving.

The export order coincides with a planned visit by President George W Bush to China in early October.

China's skies are the new battle ground for Airbus and Boeing, who have both forecast the country will become the second largest market for their products after the US within the next 20 years.

Airbus said last month that China would probably commit itself to buying between 30 and 50 of its 150-seat A320 planes by the end of the year.

Air control

A spokesman for Boeing in Beijing said it has not received official notification of the deal.

"We have nothing to confirm. We haven't received the official announcement from CAAC (General Administration of Civil Aviation of China)," said Boeing's Tom McLean.

The CAAC has urged the 10 airlines under its control to merge into three carrier groups under China Southern, China Eastern and unlisted Air China in a bid to boost competitiveness.

The industry's reorganisation will also help strengthen Air China, the national carrier, for an international listing, pencilled in for 2003.

China's civil aviation authorities submitted their restructuring plans for the 10 regional airlines to the Cabinet for approval on Monday, state media reported.

The Boeing planes are intended for flag carrier Air China, China Eastern and China Southern which last month said it intended to acquire 20 Boeing 737-800s pending government approval.

Boeing estimates China's fleets will quadruple in size by 2019, requiring 1,790 new aircraft, while Airbus forecasts demand for about 1,600 aircraft over the next 20 years.

Sino-US relations

US officials lobbied for the sales in late July, when US Secretary of State Colin Powell visited China to prepare for President Bush's trip.

Relations soured in April after a US spy plane landed in China after colliding with a Chinese fighter, sparking an 11-day standoff with Washington.

"The delegation will leave China (for the US) in mid-September to sign the contract (with Boeing)," said an official from China's State Development Planning Commission.

Chinese state media will soon announce the massive deal officially, officials said.

The industry regulator the General Administration of Civil Aviation of China (CAAC) has declined to comment.