A European Union arms embargo clamped on China in 1989 following the Tiananmen crackdown could be lifted in early 2011, Brussels sources told France's Le Figaro daily.
The lifting of the embargo on all lethal weapons "could happen very quickly," a source close to EU foreign policy chief Catherine Ashton told the paper.
An EU diplomat in Brussels refused to confirm the claim, but acknowledged that Ashton recommended as much in a report presented at a December 16-17 summit to the bloc's 27 national leaders.
Ashton's report described the embargo as "a major impediment" to Europe-China security and foreign policy cooperation.
"The EU should assess its practical implication and design a way forward," it concluded.
Lifting the embargo would nevertheless require unanimity across EU member states.
Spain recently tried to persuade opponents to lift the embargo, and the issue can be expected to come up again in mid-January when EU foreign ministers' hold informal talks in Hungary.
"We will look into this," said the diplomat.
The issue has re-emerged following talks between China and the EU in Beijing focused on economic and trade cooperation, at which China indicated it would support heavily indebted eurozone economies struggling to raise finance on open markets at affordable interest rates.
An EU official insisted there was "nothing of an exchange or negotiation whatsoever" involving the arms embargo, stressing that there "nothing given in exchange for that support."
Chinese ambassador Song Zhe recently said "it doesn't make any sense to maintain the embargo," arguing that "we will develop our own arms even faster" and claiming that arms companies in Europe "are losing out."
Europe was divided on the issue when it was discussed at a meeting of foreign ministers in September, with some mooting the idea of a conditional lifting of the embargo.
Conditions included improved ties with Taiwan, an amnesty for arrests linked to the Tiananmen crackdown, and a calendar for the ratification of the convention on civil and political rights.
The Figaro said that the Netherlands, Britain and, to a lesser extent, Germany, had each lowered their opposition to lifting the embargo.
But another diplomatic source said Britain in particular remained set against alongside the US and Japan.
Chinese troops and tanks ended weeks of pro-democracy protests in Beijing central Tiananmen Square on June 4, 1989, killing hundreds if not thousands of demonstrators.