China said conflict in the Taiwan Strait would have a catastrophic impact.
Britain on Tuesday warned China against any attack on Taiwan, telling Beijing it risked triggering domestic and global turmoil if it failed to uphold its international obligations.
In a set-piece foreign policy speech, Foreign Secretary James Cleverly restated that London wants to see a "peaceful settlement" to sovereignty claims.
China claims self-ruled Taiwan as its territory and has vowed to seize it one day, by force if necessary.
Earlier this month, Chinese forces held military exercises simulating targeted strikes and a blockade of the island.
But Cleverly said conflict in the Taiwan Strait would have a catastrophic impact on world supply chains, particularly of advanced semi-conductors.
"A war across the Strait would not only be a human tragedy, it would destroy world trade worth $2.6 trillion, according to the Nikkei Asia," he added.
"No country could shield itself from the repercussions," he told an audience at the Mansion House in the City of London financial district.
"Distance would offer no protection from this catastrophic blow to the global economy –- and to China most of all.
"I shudder to contemplate the human and financial ruin that would follow. So it's essential that no party takes unilateral action to change the status quo."
Cleverly's speech comes as Britain seeks to reset its foreign policy priorities after its departure from the European Union, with a "tilt" towards the Indo-Pacific region.
He recently returned from a swing through the region to cement political, trade and military links, in response to Chinese expansion.
Tensions between London and Beijing have been strained in recent years, notably over China's squeeze on civil rights in the former British colony of Hong Kong.
Tempers have risen also over the treatment of the Uyghur Muslim minority and a block on tech firm Huawei's involvement in the roll-out of Britain's 5G telecoms network.
- 'Profound disagreements' -
Hawkish elements in Britain's ruling Conservative party have urged the government to take a tougher stance on China.
But Cleverly instead urged a pragmatic, constructive and united Western approach to China's rising power, acknowledging the need to work in partnership with the Asian power.
"It would be clear and easy -- and perhaps even satisfying -- for me to declare a new Cold War and say that our goal is to isolate China," he said.
"Clear, easy, satisfying -- and wrong, because it would be a betrayal of our national interest and a wilful misunderstanding of the modern world.
"Instead, this government will advance British interests directly with China, alongside our allies, while steadfastly defending our national security and our values."
Cleverly said "profound disagreements" could be expected when dealing with the Chinese leadership, not least over a clash of values.
But he said Western powers owed it to future generations to speak their mind and to engage, given China's increasing importance to issues such as fighting climate change, global health, tech and finance.
He urged China to uphold its international obligations, including the Joint Declaration it signed with Britain to preserve Hong Kong's freedoms, and the UN Charter.
"If China breaks them, we are entitled to say so and to act -- and we will," he added, urging Beijing not to see that as interference in domestic affairs.
"Peaceful co-existence has to begin with respecting fundamental laws and institutions, including the UN Charter, which protects every country against invasion," he said.
"And that means every country."
Cleverly also urged Beijing to abandon its neutral stance on Russian aggression in Ukraine.
"A country that wants a respected place at the apex of the world order should stand up for its own principles, and keep its solemn obligation to defend the laws at the very foundation of that order," he added.
"This responsibility goes hand-in-hand with China's right to play a global role commensurate with its size and history."
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)