A British parliamentary researcher with links to several senior Conservative MPs is one of two people who were arrested under the Official Secrets Act.
The man, who is in his 20s, specialised in international policy with reports claiming he was spying for China.
He was arrested in March alongside another man in his 30s “on suspicion of offences under section one of the Official Secrets Act 1911”, said police.
"A man in his 30s was arrested at an address in Oxfordshire and a man in his 20s was arrested at an address in Edinburgh,” a statement from the Metropolitan Police said.
"Searches were also carried out at both the residential properties, as well as at a third address in east London."
Both men have been released on police bail until early October.
The man in his 20s lived in China for a period and worked with Tom Tugendhat before he became security minister, The Sunday Times reported.
The report also said he worked with foreign affairs committee chairwoman Alicia Kearns, who told the BBC: "While I recognise the public interest, we all have a duty to ensure any work of the authorities is not jeopardised."
A senior Whitehall source told The Times: “This is a major escalation by China. We have never seen anything like this before.”
Prime Minister Rishi Sunak is said to have raised the issue with Li Qiang, the prime minister of China, at the G20 summit.
In a letter sent to MPs, House of Commons Speaker Sir Lindsay Hoyle, warned Christine Lee, a British-Chinese lawyer had "engaged in political interference activities on behalf of the Chinese Communist Party, engaging with members here at Parliament".
She denies the claim and is suing MI5.