Rishi Sunak has said he is "acutely aware of the particular threat to our open and democratic way of life" posed by China's Communist regime.
The prime minister was responding to a damning report on the UK's China strategy by Parliament's Intelligence and Security Committee.
Ministers would take "all necessary steps" to protect the country from foreign state activity, the PM said.
He is facing calls from some Tories to officially classify China a "threat".
He has resisted taking this step, instead describing China as an "epoch-defining and systemic challenge" while acknowledging the need to engage with the super power.
On Wednesday, Labour leader Sir Keir Starmer cited the ISC report as he accused the PM of failing to heed warnings about China, leaving the UK "desperately playing catch up" on security. He called for an audit of UK-China relations.
Earlier this week, news emerged that police had arrested a researcher working in Parliament under the Official Secrets Act, amid claims he was spying for China.
The researcher - whom the BBC is not naming - denied the claims in a statement issued through lawyers. He was one of two men arrested under the Official Secrets Act.
Responding to the committee's report - which was written before the arrest had been made public - Mr Sunak said he was "particularly conscious" of the need for a "robust approach to any and all state threat activity".
The ISC had warned that China's ruling Communist Party used its "size, ambition and capability" to "successfully penetrate every sector of the UK's economy".
The cross-party committee of Parliamentarians added that "while seeking to exert influence is a legitimate course of action, China oversteps the boundary, and crosses the line into interference".
"China has been particularly effective at using its money and influence to penetrate or buy academia in order to ensure that its international narrative is advanced and criticism of China supressed."
A full government response, released alongside Mr Sunak's statement, concurred that "some Chinese action crosses the line from influence into interference".
It said it recognised that China had "tried to headhunt British and allied nationals in key positions and with sensitive knowledge and experience, including from government, military, industry and wider society".
It also said British intelligence was "acutely aware and vigilant" regarding the targeting of current and ex-civil servants.
But it said the level of resources devoted to China by the UK intelligence community has increased "significantly" in recent years.
The government last year blocked eight investment deals where the buyer was linked to China using new powers to scrutinise foreign investment, according to the statement.
The government also pointed to the fact that the government banned Huawei from the UK's 5G telecoms network, and took ownership of the stake in the Sizewell C nuclear power project previously held by the Chinese state-owned company CGN.
The government acknowledges that "further investment" would be needed to ensure it could respond to the challenge.
It said it was increasing funding for Mandarin language training and programmes to deepen expertise.
Mr Sunak said the National Security Act, passed in July, "introduces a range of new offences for foreign interference, assisting a foreign intelligence service, sabotage and theft of trade secrets" which would make the UK a "harder target".
And he said steps had been taken to protect universities from threats to freedom of speech in this year's Higher Education Act.
Conservative MP and ISC chair Julian Lewis rejected Mr Sunak's claim that the committee's report was out of date.
"Until two months before publication, we monitored all relevant developments and noted them throughout the report - this was not difficult to do given the glacial pace at which the government's China policy developed," he said.
The government has said its approach to China is guided by the need to protect the UK's prosperity and security, aligning with allies to deal with the challenges posed by Beijing, and engaging with China itself to seek constructive and stable relations.
In many areas, the government says, co-operation is vital, from mutual economic interests to the need to tackle climate change.
Last month, Foreign Secretary James Cleverly defended meeting Chinese officials in Beijing - the first by a foreign secretary in five years - arguing it would not be "credible" to disengage with China.