Even by the prolific standards of China’s foreign influence operations, it would represent a sensational case of infiltration.

A 28-year-old British man who worked as a researcher deep inside Britain’s Parliament was arrested in March on suspicion of working for the Chinese government. The man, who denies being a spy, worked with prominent lawmakers on China policy, raising fears of possible security breaches and widening a rift within the governing Conservative Party over how London should engage with an increasingly assertive Beijing.

“The Chinese are infiltrating across the board; they go for anything and everything,” said Steve Tsang, director of the SOAS China Institute in London. “What is new is how effective they are, and how far they have managed to go.”

The Metropolitan Police said two men were arrested under the Official Secrets Act and were released on bail until October. The men, whose identities were not released by police, have yet to be charged, and lawmakers were asked not to prejudice the investigation by naming them. (News organizations have also not done so, aside from The Sunday Times, which first reported the news of the researcher’s arrest on Saturday and has since named him.) Little has been disclosed about the second man, except that he is reported to be in his 30s.

In a statement through a law firm on Monday, the researcher said that he was “completely innocent” and had spent his career “trying to educate others about the challenge and threats presented by the Chinese Communist Party.”

If the man is found to have worked for China, the security breach will raise serious questions over how he passed the vetting process to get a job at the heart of one of the most sensitive policy debates in Britain. The man had earlier lived and worked in China, according to The Sunday Times.

The paper said the man may have been recruited there by Chinese agents to return to London with a goal of disrupting the work of the Parliament’s China Research Group, a circle of lawmakers who have long warned about China’s efforts to influence British universities, think tanks, and government ministries — and have urged successive British leaders to take a harder line against Beijing.

One of the lawmakers with whom the man had limited contact with is Tom Tugendhat, the founder and co-chairman of the China Research Group who now serves as security minister in the government of Prime Minister Rishi Sunak. Mr. Tugendhat is pressing internally to declare China a threat to Britain’s safety and interests — a cry that has been taken up by China hard-liners outside the government.

“China sees us now as the soft underbelly of the NATO alliance,” Iain Duncan Smith, who once served as leader of the Conservative Party, wrote in The Daily Express, a tabloid. “Our policy seems to entail not upsetting China.” He called the arrest “a slap in the face of the U.K.’s weak policy on China.”

In 2021, China put Mr. Duncan Smith, Mr. Tugendhat and several other individuals and organizations on a blacklist, claiming, among other things, that they had spread lies about human rights abuses in the province of Xinjiang.

Yet for all the hand-wringing and demands for a harder line, analysts said the British government was unlikely to deviate from its current approach, which delicately balances an acknowledgment of China as an “epoch-defining challenge” with a cold-eyed pragmatism about the need to preserve commercial ties.

“U.K. diplomacy toward China has never been particularly ideological, one way or the other,” Professor Tsang said. “You’ve occasional periods of misguided opportunism or reckless rhetoric. But in general, the British are pragmatic.”

“China is a reality,” he added. “We have to deal with them.”

Britain’s foreign secretary, James Cleverly, recently visited Beijing, after visits by senior American officials, including Secretary of State Antony J. Blinken and Treasury Secretary Janet Yellen. British officials are eager for China to send a high-level delegation to a summit meeting later this fall on how to regulate artificial intelligence technology, which is a signature initiative of Mr. Sunak’s.

There were signs that other British cabinet ministers were resisting efforts to suspend their diplomatic and commercial outreach.

“China is a country that we do a lot of business with,” the business secretary, Kemi Badenoch, said on Sky News on Monday. “China is a country that is significant in terms of world economics. It sits on the U.N. Security Council. We certainly should not be describing China as a foe, but we can describe it as a challenge.”

Still, for Mr. Sunak, the revelations are an acute headache. On Sunday, he raised the spying case with China’s prime minister, Li Qiang, at the gathering of Group of 20 leaders in New Delhi. Mr. Sunak said he told Mr. Li that he had “very strong concerns about any interference in our parliamentary democracy.”

The Chinese government quickly denied the report, calling it “completely fabricated and nothing but malicious slander.” A spokeswoman for the Ministry of Foreign Affairs, Mao Ning, said her country conducted no espionage inside Britain.

The back-and-forth is unlikely to quell the torrent of questions that followed The Sunday Times’s report. And some say the researcher’s efforts had tilted the debate over how to deal with China in Britain.

Luke de Pulford, a human rights campaigner and the executive director of the Inter-Parliamentary Alliance on China, said the man had successfully discredited people who were critical of the Chinese government with some journalists.

“Privately, he was vicious — telling journalists that I was ‘dangerous’ and ‘not to be trusted on China,’” Mr. de Pulford said in posts on X, the platform formerly known as Twitter. “He was an authoritative and knowledgeable voice — some people listened. Publicly, he was incredibly clever. He hid behind a visage of ‘reasoned hawkishness.’”

Britain has struggled to chart a consistent China policy since the Conservative-led government of David Cameron, whose chancellor of the Exchequer, George Osborne, spoke of a “golden decade” of ties between the two countries.

As relations between China and the United States soured, Britain came under pressure from the administration of President Donald J. Trump to take a harder line. Prime Minister Boris Johnson agreed to sharply limit the role of the Chinese telecommunications giant Huawei in building the country’s 5G network.

In 2020, with Beijing threatening to impose a draconian national security law on Hong Kong, Mr. Johnson pledged to allow nearly three million people from the former British colony to live and work in Britain.

Mr. Johnson’s successor, Liz Truss, vowed to take an even tougher approach. Now out of office, Ms. Truss recently visited Taiwan, where she called for the creation of an “economic NATO” to counter China’s influence. Mr. Sunak, whose instincts tend to be more pragmatic, has largely avoided the language of Ms. Truss.

But he will face continuing pressure from cases like that of the suspected spy in Parliament. Last July, Parliament’s intelligence and security committee issued a report that declared, “Chinese intelligence services target the U.K. and its overseas interests prolifically and aggressively.”

The government’s “lack of action to protect our assets from a known threat,” the report concluded, “was a serious failure, and one from which the U.K. may feel the consequences for years to come.”

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