Mark Pritchard, MP for The Wrekin, said he thought the National Security and Investment Bill, being debated in the House of Commons, was long overdue.
Mr Pritchard said it was right that the Government should be able to scrutinise strategic and sensitive investments in sectors that might pose a national security risk.
He added that such laws should also prevent companies and individuals from being exploited by hostile states masquerading as legitimate businesses.
Mr Pritchard said new laws were also needed to deal with the huge advances in technology which have taken place in recent years, as well as concerns regarding intellectual property, patents and copyright.
But he added that it was important to strike the right balance to avoid compromising national prosperity.
"I think the Government needs to be careful that investors are not put off by the potential for many months of bureaucracy and hurdles to entry to market, particularly at the start-up stage or the second or third capital raising stage for entrepreneurial small and medium-sized enterprises," he said.
"Many of these small businesses have a global reach although their turnover might not be particularly large.
"They might have fewer than 30 employees, but that does not necessarily mean that their technology and intellectual property are not of interest to some of the UK’s adversaries."
Mr Pritchard said he believed China could potentially pose a 'significant threat' in several areas.
He did, though, voice concerns about the possible impact the 'calling in' of a transaction could have on the share price of a company. He also said there needed to be safeguards to protect companies against spurious claims from competitors.
Business Secretary Alok Sharma assured Mr Pritchard that the powers would be used in 'quasi-judicial fashion', with due regard to public law principles of necessity and proportionality.