Sources close to the embassy scheme believe the Chinese may now look to turn the land into housing.

The Chinese government bought the former site of the Royal Mint in 2018 for more than £255m.

The 200-year old Grade II-listed site was where Britain’s coins were produced from 1809 to the early 1970s. The Mint itself was built on the foundations of a 14th-century Cistercian abbey, the remnants of which are still partially visible in the basement. The site was also a Black Death pit.

China planned to build a diplomatic outpost 10 times the size of its current embassy in Marylebone, near Paddington.

However, the council refused the application on the grounds that it would put local people in danger as it was at threat of a terrorist attack. Furthermore, campaigners also voiced concerns that the site could become a “secret police station”.

At the planning meeting in December last year, David Lake, head of a local residents’ association near the Mint, said: “I fear a diplomatic incident will occur because the powers available to the Chinese government are far reaching and excessive.”

The Chinese state dismissed objections as “non-material”.

At the time of the initial rejection last year, a spokesman for the Chinese embassy said: “It should be pointed out that host countries have the international obligation to facilitate and support the building of premises of diplomatic missions.

“The Chinese side urges the UK side to fulfil its relevant obligation.”