China uses its extensive state intelligence service to target Britain and its interests "prolifically and aggressively", the Intelligence and Security Committee (ISC) said, seeking to influence and penetrate every aspect of the British economy.

From academia, which was a "rich feeding ground" for China to exert political sway, to an over-reliance on Chinese technology, the government had placed too much emphasis on investment over potential security harms, it said in a report.

"The government has been readily accepting Chinese money with few questions asked," Julian Lewis, the ISC chair, told reporters.

"But without swift and decisive action, we are on a trajectory to the nightmare scenario where China steals blueprints, sets standards and builds products, exerting political and economic influence at every step," he said, adding it potentially posed "an existential threat to liberal democratic systems".

The Chinese embassy in London did not immediately respond to a request for comment.

British Prime Minister Rishi Sunak has come under pressure from some lawmakers in his Conservative Party to take a tougher stance with China, but he has tried to walk a difficult line saying the West should not decouple from Beijing.

In response to the report, he said China posed "an epoch-defining challenge to the international order", echoing Britain's recently updated blueprint for security and international policy, which stepped back from describing China as a threat.

Sunak said the government had taken measures to reduce Britain’s reliance on Chinese technology and prevent interference, but he wanted to have "open" and "constructive" relations with China.

"We are not complacent and we are keenly aware that there is more to do," he said in a statement.

The committee, which oversees the work of Britain’s intelligence community, said much of the impact China had on British national security was overt, through takeovers, mergers, and its interaction with academia and industry, but it overstepped the boundary.

It was critical of the British government, saying its focus was dominated by short-term threats, and said ministers needed to ensure security concerns were not "constantly trumped by economic interest".

"We found that the level of resource dedicated to tackling the threat posed by China's 'whole of state' approach has been completely inadequate, and the slow speed at which strategies and policies are developed and implemented leaves a lot to be desired," the ISC said.

The warnings about China echo similar comments made by the heads of Britain's spy agencies in their rare public interventions where they have cast China as the nation's top intelligence priority.

"The challenge of the rise of China absolutely raises huge questions for the future of the Western alliance," Ken McCallum, head of the domestic-focused Security Service agency known as MI5 told the ISC.