BEIJING/TAIPEI (Reuters) - China's military will crush any major moves toward independence by Taiwan, a Beijing government policy paper said on Monday, prompting the self-governing island to accuse Beijing of escalating tensions.

The defense paper was released as senior Chinese lawmakers discussed a draft anti-secession law that analysts say may legally bind China to take military action if the island it claims as a renegade province declares statehood.

"Should the Taiwan authorities go so far as to make a reckless attempt that constitutes a major incident of 'Taiwan independence', the Chinese people and armed forces will resolutely and thoroughly crush it at any cost," the paper said.

Taipei called on the world community "to stop China before it is too late."

Taiwan split from the mainland at the end of the Chinese civil war in 1949, but Beijing still sees the democratic island of 23 million as a part of Chinese territory and has pledged to bring it back into the fold, by force if necessary.

Moves by President Chen Shui-bian, who took office in 2000, to foster a separate Taiwan identity have made China's communist leaders increasingly nervous. Taiwan's top China policymaker said the anti-secession law marked Beijing's most serious attempt to pressure Taipei and, if approved, would define China as the sole arbitrator and lawmaker for relations across the Taiwan Strait...

"To Taiwan, this is a unilateral change of the status quo, a very serious provocation and an absolutely unnecessary escalation of tension," Mainland Affairs Council Joseph Wu told reporters in Taipei. "If China decides to enact the law, it may become an explosive point in cross-Strait relations."

He added: "This is an urgent call to the international community to stop China before it is too late."

NO DIRECT FLIGHTS

Wu said he saw no direct link between the release of the defense white paper and the Beijing parliament's discussion of the anti-secession law, but noted that China's military buildup in recent years has been explicit in intimidating Taiwan.

On Sunday, the Standing Committee of China's National People's Congress, or parliament, praised the draft anti-secession law and unanimously suggested it be submitted to a full session of parliament early next year.

"The situation in the relations between the two sides of the Taiwan Straits is grim," the Chinese defense paper said.

"The Taiwan authorities under Chen Shui-bian have recklessly challenged the status quo that both sides of the Straits belong to one and the same China, and markedly escalated the 'Taiwan independence' activities designed to split China," it said.

Although the paper held out the prospect of talks with Taiwan if its leaders accept the "one China" principle, Taiwan's Wu said Beijing was not interested in dealing with Chen's government and there was little chance of establishing direct chartered flights to help the flourishing trade across the Taiwan Strait.

"The Chinese government seems to be waiting for another 3- years before they want to establish any kind of contact with the Taiwan government," Wu said. Chen's second term ends in May 2008.

"If that is the case, I'll tell you that the cross-Strait situation down the road is going to be more and more difficult."

U.S. NOT HELPING

Both China and Taiwan pointed their fingers at the United States, saying Washington should heed their causes. Washington switched diplomatic recognition from Taipei to Beijing in 1979, but is bound by law to help defend Taiwan.

The United States is the island's biggest arms supplier and China said it sent the wrong signals to independence seekers.

"The U.S. action does not serve a stable situation across the Taiwan Straits," the defense paper said.

Taiwan, on the other hand, said Washington and the international community should help bring China to heel.

"It is quite clear that the inaction of the international community to China's aggressive behavior against Taiwan encourages China to continue and even escalate its rhetoric and belligerent actions," said Wu.

"I think it's time for the international community to step up and say no to China, to stop threatening Taiwan."

The defense policy paper, Beijing's first since 2002, recapped in detail developments in China's military modernization over the past two years, saying China posed a threat to no one.

It noted that Japan was adjusting its security policies. Since World War II, China has been wary of any Japanese moves to expand the role of its military, which is constitutionally forbidden from waging war and limited to defensive activities.

China's defense budget was 211.7 billion yuan ($25.58 billion) this year, the paper said. That compared with 190.79 billion yuan in 2003 and 170.78 billion yuan in 2002.