By Andrew MacAskill

LONDON China will temporarily pause plans to build a new embassy in London, in a move that may increase diplomatic tensions with Britain when both countries want to repair damaged relations, according to people with knowledge of the situation.

Beijing will miss Thursday's deadline to appeal against the local council's opposition to its plans for a new embassy near the Tower of London after local residents objected, the sources said.

China will instead hope to secure a promise from the British government to intervene if it resubmits a planning application, the people said, declining to be identified due to the sensitivity of the talks.

British officials have previously expressed concerns that London's plans to rebuild its embassy in Beijing could be impacted in a tit-for-tat response unless China is allowed to relocate its UK embassy.

The Chinese foreign ministry in a statement urged the British government to meet its "international obligation" to help it build a new embassy and said China wants to find a solution "on the basis of reciprocity and mutual benefit".

Britain's housing ministry, which would need to intervene to approve the embassy, and the foreign ministry declined to comment.

China first announced plans in 2018 to build a new London embassy in keeping with its rising ambitions, buying land on the former site of the Royal Mint - the maker of British coins - for about 250 million pounds ($318 million).

It hoped to build a 700,000-square-foot embassy, which would be China's biggest mission in Europe and almost twice the size of its one in Washington.

But while unelected planning officers in London's Tower Hamlets council accepted the proposal, local elected councillors overruled them in late 2022, rejecting it on security grounds and the impact on residents.

A spokeswoman for Tower Hamlets council said the Chinese government had until Thursday to appeal the decision, and no prior notice of plans to appeal had been given, something that would be needed if it wanted to overturn the decision.

The Chinese government could submit a fresh application at a later date to use the site for an embassy in future, the spokeswoman said.

Chinese officials have expressed frustration to the British government over its failure to help secure planning permission at official-level meetings, people involved in those talks have previously told Reuters.

Relations between Britain and China recently hit their lowest in decades after Britain restricted Chinese investment over national security concerns and expressed unease at Beijing's increasing military and economic assertiveness.

($1 = 0.7859 pounds)

(Reporting by Andrew MacAskill; editing by John Stonestreet)