A Chinese businessman and his wife have been detained and questioned in Taiwan over sensational claims made by a Chinese defector seeking protection in Australia.

Channel Nine’s The Age, Sydney Morning Herald and 60 Minutes revealed alleged Chinese spy Wang "William" Liqiang's bid to gain political asylum after giving up secrets to Canberra’s domestic spy agency on Sunday.

The espionage saga has been dismissed by Beijing as “a clumsy farce”, with Chinese authorities accusing Mr Wang of being a convicted fraudster.

But the 26-year-old Chinese national alleges he was recruited by the directors of a Hong Kong-based investment firm as cover for infiltrating the city's pro-democracy movement.

He was reportedly hired by Xiang Xin and Kung Ching, of the Hong Kong-registered China Innovation Investment Limited, to conduct spy-ops inside the territory as well as Taiwan and Australia.

With the two directors stopped as they tried to leave Taipei's Taoyuan Airport, China Innovation Investment Ltd said in a statement on Monday.

The Age, Sydney Morning Herald and 60 Minutes said Mr Wang had given Australia's counter-espionage agency the identities of the pair.

Australia's usually secretive spy agency #ASIO has made a rare public statement - confirming it is investigating claims a Chinese spy ring tried to plant a foreign agent in Australia's parliament #auspol @SBSNews pic.twitter.com/AiV5lLtr9Z — Brett Mason (@BrettMasonNews) November 25, 2019

They are "staying in Taiwan" to cooperate with local investigators, the company said, denying any links to Mr Wang or his claims.

Taiwan's Interior Minister Hsu Kuo-yung confirmed the pair were being held but told reporters he was unable "to comment on the specifics” due to confidentiality of an ongoing investigation.

The company, which on its website says it invests in energy products, has denied any link with Mr Wang.

"Wang Liqiang was never an employee of the group," it said, calling news reports "fictitious and forged".

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It fits a pattern of outright denials emerging from Beijing, which has rubbished Mr Wang's lofty claims as bluster from an "unemployed" fraudster on the run from a suspended jail sentence.

Speaking in Beijing on Monday, Foreign ministry spokesman Geng Shuang took a swipe at the "wrong positions" reported by some Australian media who have "acted out a clumsy farce".

"They have insisted on believing a suspected criminal with no credibility whatsoever", Mr Geng said, accusing the reports of "smearing and fabrication of rumours against China to an extreme".

Mr Wang is believed to living in Sydney with his wife and infant son on a tourist visa and has requested political asylum.

Taiwan President Tsai Ing-wen's ruling party has denounced China as an "enemy of democracy" following fresh claims of Chinese interference in the island's politics.

This comes ahead of presidential and legislative elections on 11 January.

Shanghai police say a man claiming to be a defecting Chinese spy who is seeking political asylum in Australia is a convicted fraudster and fugitive... as @JacquiLambie says she expects a vote on #Medevac and #EnsuringIntegrity by the end of the week #auspol @SBSNews pic.twitter.com/S64TJGENl7 — Brett Mason (@BrettMasonNews) November 24, 2019

China claims Taiwan as its sacred territory to be brought under Beijing's control by force if necessary.

Cho Jung-tai, chairman of Tsai's Democratic Progressive Party, which favours Taiwan's formal independence, said there needed to be further investigations into the foreign interference.

"The enemy of democracy is China. At present Taiwan's most ambitious opponent, competitor, is also China," Mr Cho told a news conference in Taipei on Monday.

READ MORE China dismisses defector seeking asylum in Australia as convicted 'fraudster'

Taiwan's presidential office cited Tsai as saying on Monday that the allegations were being probed and that people should not reach conclusions before a complete investigation was done.

Mr Wang said he had helped guide positive media attention toward certain Taiwanese politicians, including President Tsai's main opponent, Han Kuo-yu of the China-friendly Kuomintang party.

The Kuomintang's Mr Han said he would drop out of the election if he has taken any money from the Chinese Communist Party.

Speaking at a separate news conference, Kuomintang's spokeswoman Wang Hong-wei said the issue was one of "blundering Communist espionage” that should be investigated immediately

He accused the government of seeking to use the matter to "manipulate elections".