"I think the relationship between the Chinese state and Huawei is absolutely clear cut," he said.
"Huawei is not an ordinary international telecommunications company, it's an intimate part of the Chinese state.
"And if you know anything about Chinese military strategy they talk about the fusion of civil and military capabilities and there is a close linkage undoubtedly between the Chinese military capability and Huawei."
Huawei has always vehemently denied the claim that it has links to the Chinese military, with a spokesman saying such accusations are "categorically untrue and groundless".
Sir Richard said that it was time for the UK to consider a "reset of the whole of our relationship" with China which, he claimed, had become "more aggressive".
It comes as ministers fear Beijing could launch a cyber attack on Britain, with security sources warning of the "perfect storm" of diplomatic rows over Huawei, Hong Kong and the country's handling of the coronavirus crisis.
Australian officials claim its government and industry bodies were targeted by China's premier intelligence agency in retaliation for banning Huawei from its own 5G network.
One minister told the Mail on Sunday that such a reaction in the UK had formed "part of our conversations".
They said: "But at the same time, all risk must be looked at in the round. Huawei is a menace and not acting on it risks national security.
"Actions, however, have consequences and they cannot be discounted."
Asked if such a response was plausible, Sir Richard told Sky News' Sophy Ridge on Sunday: "It's a very aggressive step for the Chinese to take at this point in time. And I wonder whether they would, as it were, go that far at the moment.
"Of course it's a threat and I think we've known quite significantly that the Chinese have developed this capability and are prepared to use it."
Huawei has written to Downing Street requesting a meeting with Boris Johnson's senior adviser Sir Edward Lister, in which it will ask to delay its exit from the mobile phone network until after the next general election in 2025.
Sources close to the tech company told The Sunday Times it will pledge to cover the cost of maintaining the networks until then as part of a deal to push back its removal.
Meanwhile, a Chinese virologist claimed authorities in Beijing knew about the coronavirus outbreak in December, weeks before admitting it to the world.
Dr Li-Meng Yan said she was one of the first experts asked to examine a cluster of cases emerging in Wuhan last year.
The whistleblower alleges she was given the task by Professor Leo Poon, her supervisor at the Hong Kong School of Public Health.
The centre is a World Health Organisation (WHO) reference laboratory specialising in viruses and pandemics.
"The Chinese government refused to let overseas experts, including Hong Kong ones, do research in China," she told Fox News.
Dr Yan has since fled from Hong Kong to America, saying: "I know how they treat whistleblowers."
