Britain is seeking a formal process of dialogue with China on cyber-security, to address concerns over issues like hacking, industrial espionage, disruption of services and invasion of privacy.
Prime Minister David Cameron raised the issue in talks with Chinese prime minister Li Keqiang during his visit to the far eastern giant, which has long been the focus of allegations about illicit use of cyberspace.
The PM said that Britain and China should work together on making the internet function properly to drive the economy forward without undermining privacy or security.
UK Government sources said that Mr Li showed a "readiness to engage" on the issue and indicated that he would like to see more dialogue. Diplomats will now work on how to take the proposal forward into practical action.
Speaking to reporters in Shanghai, Mr Cameron said: "I think that a proper cyber dialogue between countries is necessary and I have raised this with the Chinese leadership - that we need to properly discuss these issues.
"It is an issue of mutual concern and one that we should be discussing."
Britain was already increasing its investment in cyber-defence, with around £600 million devoted to it in the strategic defence and security review, said the PM.
Mr Cameron also launched a defence of UK pharmaceuticals company GlaxoSmithKIine, which was drawn into a bribery case in China earlier this year which resulted in police detaining four Chinese executives.
Peter Humphrey, a British man running a risk advisory group, was also detained and is still being held.
Mr Cameron said he didn't want to comment on an 'on-going case'.
But he added: "All I'll say is that from all my dealings with GSK I know that they are a very important, very decent and strong British business that is a long-term investor in China and it's a business that very much does think about the long-term development of its products and its businesses. I think it is right to raise a case like that.
"Britain has a record of properly standing up for British businesses and British individuals, raising individual cases in the right way and about having a proper dialogue with the Chinese authorities about the issues."
GSK were among more than 120 British companies joining the Prime Minister on his three-day visit to China, which has been dominated by efforts to boost trade and economic links.
In talks with Mr Li and president Xi JInping in Beijing on Monday, the Chinese leadership made clear they were interested in investing in the HS2 high speed rail link between London and the north of England, and Mr Cameron assured them that there would be "very open competition" for any Chinese firms wanting to get involved.
Moving on to Shanghai on Tuesday, the PM welcomed the announcement of an £80 million investment in the manufacture of black London taxis in Coventry by Chinese car firm Geely, posed for a "selfie" photograph with Jack Ma - the creator of China's biggest online retail site, which will provide a shop-window for UK firms seeking customers in China - and hailed a treaty which will allow easier access for UK films to cinemas in a country which is opening new screens at a rate of seven a day.
Addressing a business lunch in Shanghai, Mr Cameron said his message to Chinese companies was: "If you are investing in Britain, invest more. If you are thinking of investing in Britain, come and find us. You will get a warm welcome."
But there was a less warm welcome for the Prime Minister from the state-run Global Times newspaper, which said in an editorial: "We've discovered that Britain is easily replaceable in China's European foreign policy. Moreover, Britain is no longer any kind of 'big country', but merely a country of old Europe suitable for tourism and overseas study, with a few decent football teams."
Mr Cameron stressed Mr Li's characterisation of Britain and China as "indispensable partners" as an indication of the deepening bonds between the two countries.
He said the presence of the largest ever British business delegation in his party had resulted in "big success in terms of business deals - £5.6 billion and counting - and jobs created back home".
They ranged from a £4.5 billion contract for Jaguar Land Rover to supply 100,000 luxury vehicles to smaller deals for Moulton to provide bicycles for the Chinese market and even a contract for Manchester-based Sweet Mandarin foods to sell Chinese sauces to the Chinese.
Mr Cameron said he made "no apologies" for using prime ministerial trips abroad to promote British business, which has resulted in some accusations of cronyism.
"This visit for China is very much about that," he said. "Britain's success in the world is going to be determined by attracting inward investment, selling our goods and services overseas, carving out a niche for Britain in a very globally competitive world.
"There are many things that prime ministers have to do, but actually I think standing up for jobs and growth and business and Britain making our way in the world and winning a share in markets like this, in the past we have sometimes underplayed. I think sometimes there's been a cynical view about loading up aeroplanes and taking businessmen and all the rest, but I think it's absolutely the right thing to do, I'm very proud of doing it and I will go on doing so."
Mr Cameron played down the dismissive assessment of the UK's stature in China's state-run Global Times newspaper, which said in an editorial: "We've discovered that Britain is easily replaceable in China's European foreign policy. Moreover, Britain is no longer any kind of 'big country', but merely a country of old Europe suitable for tourism and overseas study, with a few decent football teams."
Responding to the comments, he said: " I would just prefer to go on the figures. This is a visit that has delivered almost £6 billion worth of deals. It is a visit that comes on the back of an 18-month period where we have seen more Chinese investment into Britain in the last 18 months than in the previous 30 years.
"And also it is a visit where we have seen very good, high-level, substantial discussions both with the premier and with the president - the premier who described the partnership as indispensable."
Mr Cameron had a taste of both the ancient and modern sides of China as he visited the city of Chengdu, in Sichuan province, deep in the vast country's south-western interior.
He toured the thatched cottage home of China's most famous poet Du Fu, originally constructed more than 1,200 years ago in 760 and set in a park of bamboo groves, gnarled trees, intricate stone carvings and lodges with traditional pitched roofs.
Then he moved on to lay the foundation stone at World Exchange City, a massive new development of dozens of skyscrapers set to house commercial, retail and entertainment space for the rapidly-expanding city.
Although an unfamiliar name in the West, Chengdu is an important centre for consumer electronics and has seen its economy grow by 13% and its population soar past 14 million since 2011.
British companies have invested hundreds of millions of pounds in the WE City development by Jardine Matheson-owned Hongkong Land, with involvement in the project from companies including Benoy, Merlin entertainments, Balfour Beatty and Savills.
Mr Cameron described the pace of change in Chengdu as "rapid and exciting" and added: "It was said in 19th century America that if you wanted to see the future you should Go West, and I think today the same could be applied to China."
It appeared that the frenetic activity he has observed in China's schools, universities and workplaces during his three-day visit may be bad news for his school-age children, Nancy and Elwen.
"They remind me I must make sure when I get home to speak to my nine-year-old and seven-year-old that they are going to have to work even harder to keep up with this extraordinary nation you are building," he said.
Mr Cameron was almost introduced as "the Prime Minister of the United States" until the announcer hastily corrected her slip of the tongue to say "Kingdom".
He donned a white hard hat to chat with workmen loading breezeblocks into wheelbarrows, as he toured the construction site with Jardines managing director Adam Keswick.
And he signed a hard hat for staff to leave behind as a memento of his visit.
Mr Cameron went to a school in Chengdu, where he spoke to six and seven-year-olds learning English.
The Prime Minister visited a classroom bedecked with Union flags where Chinese schoolchildren dressed in blue and white uniforms practised their English on him and read out cards listing well-known London sites.
Mr Cameron picked up a cricket bat and a football and discussed the fortunes of Manchester United with one boy who said he was a fan of the club. He then presented the children with letters written by British schoolchildren learning Mandarin.
The Prime Minister then moved to the playground where he briefly participated in a doubles game of outdoor table tennis. The children presented him with a Chinese table tennis bat .
Mr Cameron played down criticisms in the state-run Global Times newspaper, telling Sky News: "I prefer to deal in the facts, and the facts are good, strong political and diplomatic relations covering every aspect including human rights and very strong trade and investment, with Britain over the last 18 months getting more inward investment from China than over the past 30 years.
"That's what matters to me - rebuilding the British economy, turning the economy around, dealing with our debts, getting people to work, and Chinese investment and our trade with China will help in a big way."
Mr Cameron was asked if he regretted his meeting with the Dalai Lama, which plunged relations with Beijing into the freezer for a period, until he made clear publicly that Britain does not support independence for Tibet.
He replied: "I met the Dalai Lama as leader of the opposition, I met him as Prime Minister, I don't have plans to meet. I think we have a good understanding of each other's positions between Britain and China and that has been dealt with quite properly on this visit.
"I don't regret any of the things that I've done in my political life. You make your choices, you make your decisions.
"I prefer to deal with where we are now, which is very strong relations - what the premier here describes as an indispensible partnership, what the president described as relations being taken to a new level. And, as I say, Britain has with China a set of relations where we discuss economic matters, we discuss diplomatic matters, we discuss world crises and issues - Syria, Iran - and we also discuss human rights, and that's how it should be."
Asked whether he was concerned that the UK's cyber-security might be compromised by the involvement of Chinese firms such as Huawei in Britain's telecoms infrastructure, Mr Cameron told Channel 4 News: "I think one of Britain's advantages in this modern, globalised world is that we welcome overseas investment.
"We have a proper system in the UK for examining whether investments in the UK are pro- competitive and whether they're in the national interest.
"We also have a very good way of defending ourselves in terms of cyber-security, I think we're one of the most advanced countries in the world in terms of the action we're taking on cyber- security, and I've made sure we've put extra money into it.
"Having said that, should we put in place political barriers, and say 'Well, we have a system for checking whether it's in the national interest, we have cyber defences, but we don't want you to invest because we don't like the look or the sound or the feel'? I think that would be a mistake for Britain, I think that's a mistake other countries are making."