"National List MP Jian Yang has not been transparent about his extensive training and service in China's secret intelligence agencies", says New Zealand First Leader and Northland MP Rt Hon Winston Peters.
He said his students only collected information through communications in China.
The prime minister, Bill English, told reporters he had been aware of Yang's background and did not believe the Chinese politician had tried to hide it.
Yang held a press conference at which he decried the investigation as a "smear campaign by nameless people who are out to damage me and the National Party 10 days from an election, just because I am Chinese".
"Members of the Chinese community in New Zealand would have been obliged to respond to any fundraising request from him as a few would have been aware of his background, and present links to their homeland".
If you define those cadets or students as spies, yes, then I was teaching spies.
This is likely what has SIS anxious - particularly as New Zealand shares national security information with the four other major anglophone countries (the USA, the U.K., Australia, and Canada), and as Yang had sat on the parliament's select committee for foreign affairs, defense, and trade from 2014 to 2016.
Mr Goodfellow said he had "no idea" about any Security Intelligence Service probe, while Mr English did not comment.
In Beijing, Chinese foreign ministry spokesman Geng Shuang poured scorn on the article but said China would not comment on other countries' domestic matters.
United Kingdom terror arrests hit record high in wake of attacks
The number of people arrested was not made available in Wednesday's release, nor would the Home Office provide it when asked. Domestic terrorism refers to activity where there are no links to either Northern Ireland-related or global terrorism.
Dr Yang said he had not had any involvement with the Communist Party since leaving China in 1994.
'Although I was not born here, I am proud to call myself a New Zealander, obey our laws, and contribute to this country'.
"We firmly oppose the false reports issued by certain media that make up stories on hearsay evidence or out of thin air", Geng said.
Mr Yang visiting China for a gala luncheon with Li Keqiang, the Premier of the State Council of the People's Republic of China, in March.
FT said he majored in English language at the People's Liberation Army Air Force Engineering Academy in 1978, and also taught at the academy after he graduated.
"I can understand people can be concerned, because they do not understand Chinese system, but once they understand the system they should be assured this is nothing really you should be concerned about", he said according to a Newshub report.
He also used the opportunity to lash out at Chinese ownership in New Zealand, including Silver Fern Farms, which has its headquarters in Dunedin.
China is one of New Zealand's top trading partners.