Leading British firms and government agencies have been warned Chinese state organisations may be spying on them.
China says it has also been attacked by computer hackers
UK intelligence network MI5 has contacted 300 chief executives and security experts at banks and financial institutions to raise the concerns.
It is alleged that UK organisations may suffer a concerted cyber attack to gain commercially-sensitive data.
Zhao Shangse, an official from the Chinese embassy in London, has denied the allegations.
Recently, the head of MI5, Jonathan Evans, said that Britain faces a threat from digital espionage.
It is believed the letter from MI5 warns companies that they are the target of attempts to gain technical and commercially sensitive information.
Experts say there have been unprecedented waves of attacks on computer systems worldwide in the last year.
A number of countries have accused China of trying to hack into their systems. It is believed many major developed nations engage in very similar behaviour.
China's highly sophisticated technologies make it a world leader in computing.
Earlier this week, China said that it too had been attacked by computer hackers. Meanwhile, other experts say that hackers outside of China may be using the country's many insecure computers and networks to disguise their locations.