Ben-Eliezer appraised relations between the two countries and glossed over the affair. "We have to see it as an incident inside the family and not as a crisis between two states," he told Zhanlin. Ben-Eliezer promised to work to strengthen the defense ties with Beijing.

Zhanlin told Ben-Eliezer that he believes China knows how to overcome the difficulties and strengthen the ties, according to a statement issued by the Defense Ministry. China is fully prepared to cooperate with Israel.

China has reportedly demanded that Israel pay more than $2 billion in compensation for the cancellation of the sale of an Ilyushin-76 outfitted with a sophisticated Phalcon radar system. It also wants its deposit back.

Defense officials have said they were discussing the Chinese demands.

Under pressure from the United States, former Premier Ehud Barak last year scrapped a deal to sell the Phalcon airborne radar system to China. U.S. officials at the time expressed concern that the technology could improve China's ability to launch an offensive strike against Taiwan.

Israel had agreed to sell China the Phalcon radar system built on a Russian plane for $250 million. China had an option to buy up to three more planes. The Chinese had reportedly paid $200 million for the first plane.

U.S. lawmakers threatened to cut aid to Israel if the deal went through. Barak agreed on the sidelines of the Camp David peace talks in July 2000 to cancel the sale, drawing protests from Chinese President Jiang Zemin.