Erik Prince
Former Blackwater CEO Erik Prince testifies before the House Oversight and Government Reform Committee on security contracting in Iraq and Afghanistan in 2007. Reuters

A close associate of US President Donald Trump and brother of Education Secretary Betsy DeVos is helping China create its own private army, sources have said.

Erik Prince, a former US Navy SEAL, is the founder of the infamous Blackwater mercenary army, which grew in notoriety after employees of the company gunned down 17 innocent people in Baghdad's Nisour Square in 2007.

The 47-year-old was then forced to testify to US Congress and a number of laws were passed to limit the use of private armies, but Blackwater continued to receive funding from the CIA under a variety of different names and guises.

Prince sold Blackwater in 2010 and then founded Frontier Services Group (FSG), which carries out "security and logistics" services.

It has operated in South Sudan, the United Arab Emirates and is trying to convince Nigeria's government to let it fight Boko Haram but China is said to be Prince's biggest target.

Sources have told BuzzFeed that Prince envisions training and deploying an army of Chinese retired soldiers who can protect Chinese corporate and government strategic interests around the world, without having to involve the Chinese People's Liberation Army.

"He's been working very, very hard to get China to buy into a new Blackwater," one former Prince associate told the publication.

"He's hell bent on reclaiming his position as the world's pre-eminent private military provider."

Another former ally of Prince said: "The idea is to train former PLA soldiers in the art of being private military contractor. That way the actual Red Army doesn't have to go into these remote areas."

Such areas could include China's troubled Xinjiang region, where the Muslim Uighur minority has been suppressed.

A spokesman for FSG strongly denied the reports, in spite of the company's own press releases stating they planned on opening "a forward operating base" in Yunnan province and one in Xinjiang.

"FSG's services do not involve armed personnel or training armed personnel," the statement said.

The training at the Chinese bases would "help non-military personnel provide close protection security, without the use of arms."

Exporting military services to China is illegal under US law. Trump is also seen to be hostile to China and has previously labelled the country as the "enemy".