Labour MP Sarah Champion, who chairs the Commons International Development Select Committee, said: “Multiple government agencies and government departments have raised concerns about this mega-embassy.
“Our international partners have raised concerns about it.
“Every security briefing I’ve had identifies China as a hostile state to the UK.
“I am in no doubt this mega-embassy should not be allowed to go ahead.”
Pennycook repeatedly told MPs it would be “inappropriate” for him to comment on a live case, insisting that the final decision would be made by the Ministry of Housing, Communities and Local Government.
He added: “We recognise that China poses a series of threats to UK national security and we challenge these robustly.
“China also presents opportunities to the UK as the world’s second-largest economy and the UK’s third-largest trading partner.”
Lib Dem MP Bobby Dean said he was “exasperated” by Pennycook’s responses, which he said had failed to recognise the “huge diplomatic consequences” of the decision.
He said the minister was “treating this development as a mere wrinkle in a bureaucratic planning matter and that is simply not the case”.
Sir Keir Starmer has been planning a trip to China for early this year, which would be the first by a British Prime Minister since 2018.
Approval for the London embassy has long been a priority for China’s government, which bought the site for £255m in 2018.
On Monday, nine Labour MPs wrote to the housing secretary urging him to reject the mega-embassy plans.
The site, opposite the Tower of London and once home to the Royal Mint, would be the biggest embassy any country has in Europe.