WASHINGTON, Aug 4 (Reuters) - The U.S. State Department approved the potential sale of 40 155mm M109A6 Medium Self-Propelled Howitzer artillery systems to Taiwan in a deal valued at up to $750 million, the Pentagon said on Wednesday.

This comes after a series of arms sales last year that included drones and coastal missile defenses meant to upgrade the island's capabilities and discourage a Chinese invasion. The Biden administration has approved other direct commercial sales of arms to Taiwan since taking office.

The package would include the howitzers, 1,698 precision guidance kits for munitions, spares, training, ground stations and upgrades for Taiwan's previous generation of howitzers, the Pentagon said.

The Pentagon's Defense Security Cooperation Agency notified Congress of the possible sale on Wednesday.

Taiwan's defense ministry expressed "sincere gratitude" to the U.S. government in a statement on Thursday, saying the sales would help its ground forces increase their "capacity for speedy reaction and fire support".

The ministry called the continuous U.S. arms support a "basis for maintaining regional stability."

Like most nations, the United States has no formal diplomatic ties with Taiwan but is required by law to provide the Chinese-claimed island with the means to defend itself and is its most important international backer, to Beijing's anger.

Despite approval by the State Department, the notification does not indicate that a contract has been signed or that negotiations have concluded.

The Pentagon said BAE Systems Plc (BAES.L) was the prime contractor for the weapons.