However, any sale is likely to be highly politically contentious and would need the approval of Schroeder's centre-left ruling coalition, which includes the environmentalist Greens.

A previous proposal to export the facility to Russia collapsed in 2001 amid the political concerns of, among others, the Greens.

News of the potential sale of the technical equipment came after Schroeder met Monday with Chinese Premier Wen Jiabao.

Wen expressed interest in the plant during their talks, and the chancellor promised to study the request, German government sources said.

Schroeder is on the second day of a three-day visit to China, his fifth in as many years, focused on at boosting economic relations. He is accompanied by a strong business delegation including Siemens boss Heinrich von Pierer.

In Germany, a Siemens spokesman quoting von Pierer said: "We are beginning talks with interested Chinese parties about a sale of the technical facility.

"Herr Schroeder has said that he is not in principle against it."

The spokesman told AFP that Siemens was confident about the outcome of the talks.

A Chinese delegation has already inspected the facility at Hanau in western Germany, and Siemens has lodged an application for an export licence.

However, the political aspect will be a much tougher nut to crack.

The Siemens spokesman said that it was "confident as far as the talks go," pointedly refraining from commenting on the political question.

He said export permission would be needed from the government and that the speed of any sale would depend on what kind of political support it had.

The factory, touted as Europe's biggest plutonium plant producing fuel for nuclear reactors, was completed in 1991 at a cost of 700 million eurosmillion dollars), but never went into operation and was abandoned in 1995.

It is estimated to be worth about 50 million euros today, although Siemens would not comment on the figure.

A spokeswoman for Germany's federal exports office confirmed an application had been lodged there.

She told AFP that it was being studied "at ministerial level" as there were "political considerations" at play.

The Hanau plant was abandoned after safety concerns and because, according to Siemens, of "political difficulties" at a time of growing debate about the future of nuclear power.

The environment minister of Hesse state, which includes Hanau, was Joschka Fischer of the Greens, who is now Germany's foreign minister.

It was under pressure from the Greens that the federal government has since committed to phasing out nuclear energy altogether, and the party is believed likely to object to a sale of the equipment in Hanau.

The environmental group Greenpeace urged Berlin to refuse, saying any sale would effectively mark "a German contribution to political destabilisation in the Far East."

It warned that the fuel could be refined to extract weapons-grade material. The plant "should be scrapped."

TERRA.WIRE