SYDNEY (Reuters) - Australia has selected U.S. defence company Lockheed Martin Corp LMT.N as its preferred bidder to supply the combat system for its new $38 billion fleet of submarines, the country's defence industry minister said on Friday.

A sign at the new Lockheed Martin Manufacturing Centre of Excellence is seen at the company's headquarters in Ampthill near Bedford, Britain June 9, 2016. REUTERS/Peter Nicholls/File Photo

Lockheed Martin beat out competition from U.S. rival Raytheon Co RTN.N, which built the system for Australia's existing Collins-class submarines.

Australia chose French naval contractor DCNS Group in April to build 12 new submarines in a deal worth A$50 billion (£29.47 billion) - one of the world’s most lucrative defence contacts.

France beat out offers from Germany's ThyssenKrupp Marine TKAG.DE and Japan's Mitsubishi Heavy Industries 7011.T and Kawasaki Heavy Industries 7012.T.

Japan’s bid had been seen as an early frontrunner, helped by a view that the United States wanted to cement security ties between regional allies Japan and Australia to counter China’s growing assertiveness in the South China Sea and beyond.

The decision to select Lockheed Martin will see Australia share the same weapons system provider as the U.S. Navy, offering greater interoperability between the two allies.

“By partnering with an Australian-based company with strong links to the United States, we will ensure that we get the best Australian and U.S. technology, while ensuring that our sensitive technology is protected,” Minister for Defence Industry Christopher Pyne said in a statement.

The value of the contract was not disclosed.

Pyne also announced Australia had signed the first contract with DCNS to commence the design work for the new submarines.

DCNS, which is 35 percent-owned by defence electronics giant Thales SA TCFP.PA, was criticised last month after more than 22,000 pages outlining details relating to submarines it is building for India were published in an Australian newspaper.

The leak sparked concerns about DCNS’s ability to protect sensitive data and drawing a warning from Australian defence officials.

The new fleet of submarines is a key element of Australia’s increased defence spending, which will rise to A$195 billion, or 2 percent of GDP, by 2021-2022.

In addition to the submarines, Australia is buying new equipment including frigates, armoured personnel carriers, strike fighter jets and drones.

But Canberra’s defence plans have riled Beijing, with the Foreign Ministry expressing “dissatisfaction” with Australia’s “negative” remarks on the South China Sea and its military development.