Rishi Sunak and allies will establish a new team to root out and counter Russia and China’s use of economic coercion to influence nations’ decisions.
The Prime Minister will stress at the G7 summit in Hiroshima the need to coordinate responses to attempts to hold countries to ransom by threatening their economies.
He is concerned about the impact of the stranglehold that Vladimir Putin imposed on European gas supplies to counter support for Ukraine.
China hit Australia with a punitive tax on wine and other products after Canberra supported calls for an investigation into the origin of the coronavirus pandemic.
Lithuania was also targeted by Beijing with sanctions over its position on Taiwan.
The G7 – which includes the US, Canada, France, Germany, Italy and Japan, as well as the EU – will set up a coordination platform to identify future vulnerabilities.
They will then coordinate protective measures for vulnerable allies and support them if they are targeted.
Mr Sunak said: “We should be clear-eyed about the growing challenge we face. China is engaged in a concerted and strategic economic contest.
“And when Russia weaponised Europe’s energy supplies, it was a sign of what can happen when we rely too much on states who don’t share our values.
“Our collective economic security matters now more than ever. By working together and avoiding competition between friends, we can lift our prosperity, innovate faster and out-compete autocratic states.”
The move is likely to anger Beijing.
Asked about the reported move earlier this week, Chinese foreign ministry spokesman Wang Wenbin said: “If any country should be criticised for economic coercion, it should be the United States.
“The US has been overstretching the concept of national security, abusing export control and taking discriminatory and unfair measures against foreign companies. This seriously violates the principles of market economy and fair competition.”
Also on Saturday, Mr Sunak will hold a meeting with French president Emmanuel Macron.
Downing Street said they will discuss their efforts to tackle small boat crossings of the Channel.
