China's plans to build a new embassy on the site of the two-century-old Royal Mint Court near the Tower of London have stalled for three years over opposition from local residents, MPs and Hong Kong pro-democracy campaigners in the United Kingdom.
The decision was announced before an expected visit to China by Prime Minister Keir Starmer this month, the first by a UK leader since 2018.
Some UK and Chinese officials said the trip was dependent on the embassy being approved.
Despite security concerns, the UK's intelligence agencies, which were involved in the approval process, said any threat could be mitigated.
"National security is our first duty," a government spokesperson said in a statement.
But the years-long process might not quite have reached its end.
Local residents said they would seek a legal challenge, saying the decision would be unlawful if UK officials privately gave China assurances the project would be approved before the planning process had been completed.
The Chinese government purchased Royal Mint Court in 2018 but its requests for planning permission to build a new embassy on the site were rejected by the local council in 2022.
Chinese President Xi Jinping asked Starmer last year to intervene.
The government took control of the planning decision last year and an inquiry was held last February to hear arguments about whether the embassy should be approved.
Some politicians in the UK and the United States have said Chinese authorities should be barred from building on the site near London's historic financial district because it might enable China to eavesdrop on fibre-optic cables used by finance firms which travel underneath the area.
The opposition Conservative Party described the decision as a "disgraceful act of cowardice" from a government "utterly devoid of backbone".
The Chinese embassy in London said in a one-line statement that it noted the government's decision.
UK security officials had warned that allowing China to build a much larger embassy would mean more Chinese spies in the country, an assertion dismissed by the Chinese embassy.
The UK's MI5 domestic spy agency has repeatedly warned of attempts by China to recruit and cultivate people with access to the UK government, and MPs were warned in November about interference by officials in Beijing.
Dissidents have also protested the plans, saying a mega embassy housing large numbers of officials would further China's repression of activists abroad.
The collapse of a trial of two UK men charged with spying on members of parliament for China led to criticism the government was prioritising better relations over national security.
However, in an unusual step, the head of MI5 and intelligence communications agency GCHQ issued a joint letter on Tuesday saying a package of national security mitigations had been formulated for the embassy.
"For the Royal Mint Court site, as with any foreign embassy on UK soil, it is not realistic to expect to be able wholly to eliminate each and every potential risk," the letter said.
They said there were "clear security advantages" to consolidating China's current seven diplomatic premises in London onto one site.
The UK has in the past decade moved from saying it wanted to be China's biggest supporter in Europe to being one of its fiercest critics, and is now trying to reset relations again.
Starmer said last month closer business ties were in the national interest.
China purchased the embassy site for 255 million pounds ($A509 million) and the new mission would be one of the largest diplomatic outposts in the world with a footprint of about 55,000 square metres, according to the planning application.
That is almost 10 times the size of China's current embassy in central London and considerably bigger than its embassy in the United States.
Before Tuesday's decision, China had blocked plans by the UK to expand its embassy in Beijing, officials involved in the talks said.
Royal Mint Court was from the early 19th century until 1967 the site of the Royal Mint, where coins are produced.
with AP
