China represents the "largest state based threat" to Britain's economic security, Deputy Prime Minister Oliver Dowden has told the BBC.
It comes as figures show the government had to intervene in eight attempted takeovers of UK firms by Chinese buyers last year over national security fears.
That was more than any other country, but UK and US deals were also targeted.
Mr Dowden said the decisions were "country agnostic" but he was "clear-eyed" about UK national security.
"I'm very clear that I do not want us to decouple from China, I don't think it's in our interest," he said.
"But at the same time, we have to be clear-eyed about protecting our national security, just in the same way that the Chinese are."
Under the National Security and Investment Act 2021, the government has the power to block or impose remedies on investments deemed to pose a national security risk.
In a report, the Cabinet Office said it had received 866 notifications about potential breaches last financial year, relating to areas such as defence, energy, advanced materials and communications.
Of these it chose to "call in" 65 for further assessment - 42% of which involved acquirers associated with China, 32% with the UK, and 20% with the US.
The Cabinet Office approved most of these deals but issued "final orders" in 15 cases, blocking, unwinding or imposing conditions on the deals to protect national security.
It said eight of these final order involved acquirers associated with China, four with the UK, and three with the US.
Asked why Chinese deals were disproportionately targeted, Mr Dowden said: "The first [reason] is China is just a very big investor, globally. And the second is, as we set out in our national security review, China represents the largest state based threat to economic security.
"So it's not a surprise that we should look carefully at Chinese transactions. But equally, we look across the board."
Chinese firms have been targeted by regulators around the world in the last few years amid concerns that the Chinese state might use them for spying purposes.
Prominent examples include Chinese telecoms giant Huawei, which was banned in 2020 from the UK's 5G mobile networks - a decision mirrored by other countries.
Last year, Chinese social media app TikTok was banned on UK government devices as part of wider app review.
In the report, Mr Dowden said the National Security and Investment Act was meant to be "light touch", incentivising investment in the UK ,while also protecting national security "in an increasingly volatile world".
He told the BBC that by blocking or imposing remedies on deals, foreign investors would have more confidence to invest in Britain "because they know it's safe".
"But at the same time, we cannot find ourselves in a situation where we totally decouple from an economy like China's, it's not in our national interest in terms of jobs and prosperity," he added.
"What we have to do is de-risk that engagement. And that is precisely what this kind of legislation enables us to do."
BBC
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