Chinese telecoms giant Huawei is to open a £125m research and development centre in the UK, despite MI5 warnings of security concerns about the company.
The announcement came on the fourth day of the Chancellor's visit to China, during which he spent the day at the company's global headquarters in the southern city of Shenzhen.
By visiting the sprawling campus-based site with a delegation of small and medium-sized British tech firms, George Osborne gave a clear endorsement of a controversial company.
The United States government has recommended that US telecoms firms should not buy Huawei's network infrastructure products which make up 74% of its business.
Huawei employs some 150,000 people worldwide
A US congressional report expressed serious security concerns about the company because of its alleged links to the Chinese government and Chinese military.
Huawei's founder and chairman Ren Zhengfei is a former officer in the Chinese army, while the company also has a Communist Party "cell" operating within it, although this is a standard requirement for all Chinese companies employing a certain number of people.
In June, the UK Intelligence and Security Committee (ISC) also published a report into the issue.
Mr Osborne responded to some of the security concerns, saying: "I know that there are some countries which are a little bit nervous of Huawei. That is not the United Kingdom.
"I think Huawei is a fantastic company with a great future - and a great future in the United Kingdom."
The firm's chief, Ren Zhengfei, held private meetings with George Osborne
The main purpose of the ISC report was to explore a decision in 2005 to award Huawei a contract to replace BT's copper cabling infrastructure with fibre optics.
However, within the report were expressions of concern about Huawei's operations from the UK Security Service MI5 and the UK government's Joint intelligence Committee (JIC).
The report revealed that in 2008 MI5 had said that "theoretically the Chinese state may be able to exploit any vulnerabilities in Huawei's equipment".
The JIC is quoted as saying: "An attack would be very difficult to detect or prevent and could enable the Chinese government to intercept covertly or disrupt traffic passing through Huawei-supplied networks."
Huawei has gained ground in the competitive tablet market
The Chancellor's announcement represents a further commitment to invest in the UK by a massive Chinese firm.
Describing China's growth in hi-tech industries as a "huge opportunity" for Britain, he said: "We have some of the most innovative tech companies in the world and China offers them a huge export market.
"I am delighted to be introducing some of China's tech giants in Shenzhen to some of Britain's leading tech entrepreneurs."
Mr Ren said the UK was home to "some of the best hi-tech professionals in the world", adding: "Their creativity is a major asset to our research and development efforts, helping us produce the most advanced and competitive telecoms and broadband services available."
Huawei employs 150,000 people worldwide. Forty thousand of them are based at the Shenzhen HQ, where the average age is 26. The company boasts that it employs China's best brains.
The location of the new UK site has not been decided, but it is expected to employ 300 people.
More than 70% of Huawei's operations are dedicated to telecoms infrastructure - big ticket items like fibre optic cables and telecom network equipment.