"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".
New Zealand will hold general election on 23 September.
"From the beginning I made it clear to the party that I have this military background, not only to the party but also to other people", he said.
Winston Peters, whose New Zealand First party is widely expected to form a ruling coalition with either the National or Labour parties, said that New Zealanders should be "very concerned".
However Mr Peters says he is concerned and is calling for action.
In Beijing, a Chinese Foreign Ministry spokesman would not comment on the internal affairs of other countries, but said "we are firmly opposed to false reports, groundless accusations and falsifications from some media", the Agence France-Presse reported.
'I have been nothing but upfront and transparent about my education and employment, ' he said.
Dr Yang was a student at the People's Liberation Army Air Force Engineering College and the Luoyang language institute, run by the agency responsible for Chinese spying. The Financial Times said the latter institution specializes in training military intelligence officers and deep cover agents.
He warned that while Beijing appeared to see New Zealand as a softer target than countries such as the USA and Britain, "it may also be using it as a testing ground for future operations in other countries". "But once they understand the system they should be assured this is nothing, really, to be concerned about".
After that he went on to work in universities in New Zealand, before making the switch to politics.
China is one of New Zealand's top trading partners.