Kenyan police have arrested 77 Chinese nationals and are consulting experts to see if they used advanced communications equipment in several houses in an upscale Nairobi neighbourhood to commit espionage.
Kenya's foreign ministry has also summoned China's top diplomat in the capital Nairobi as it seeks to establish if Beijing was in anyway linked to the affair.
Police said they believed the gang was "preparing to raid the country's communication systems".
The Daily Nation newspaper said a series of police raids had turned up equipment capable of infiltrating bank accounts and government servers, Kenya's M-Pesa mobile banking system and ATM machines.
"The suspects are being interrogated to establish their mission in the country and what they wanted to do with the communication gadgets. They have been charged in court," said the director of Kenya's Criminal Investigation Department, Ndegwa Muhoro.
"We have roped in experts to tell us if they were committing crimes of espionage,'' he told the Associated Press news agency.
Police said many of those detained appeared to have been in the country illegally.
The arrests began on Sunday, when computer equipment in one of the upscale houses the Chinese nationals had rented near the US Embassy and UN headquarters caught fire, killing one person.
Kenyan foreign minister Amina Mohamed "made it clear that the Chinese government should fully cooperate on this matter," Kenya's communications minister Fred Matiang'i said, adding that China has promised to send investigators to Kenya to work on the case.
Police said it appeared the group was also manufacturing ATM cards, and that the suspects may have been involved in money laundering and Internet fraud.