Any concerns the Foreign Office had appears to have been considered. I think it was in March, there was a discussion in Cabinet about the issue of HK and BNO passports. At the time the Home Secretary was in favour of changing the law and the Foreign Secretary wasn't. But now that the Foreign Secretary is on board - and indeed making many of the public announcements on the subject - that would appear to show that concerns about a Chinese response have been taken noted but not changed the government's position.
Also, the Foreign Office has no role in the management of immigration. The Home Office is much less worried about diplomacy than the FCO. So I doubt Home Office civil servants would be against a change in the law either.
Next, China hasn't said what it will do. It has made generic threats, like does when arms sales are made to Taiwan or countries criticise it on human rights grounds. There's no reason to believe it will take measures that will make a difference. Like it made threats against Australia and all it did in the end was put some import restrictions on barley. That hasn't changed Australian policy. In fact, I understand there are new rules coming that will restrict foreign takeover of Australian firms on national security grounds, which is largely aimed at China.
If China said something really concrete, like "if you extend immigration rights to HK residents, we will put a total trade and investment embargo on the UK as soon as the transition period with the EU has ended", that might cause a rethink. But if it's just the usual "we'll do something you might not like", I don't see anyone stepping in to help Beijing - unless the new security legislation is surprisingly narrowly-focused and former critics are less worried.
EDIT: Also, I'm slightly confused by your expectations of what will happen next. Are you saying that the UK government will not put the bill forward because of lobbying, or that it will put the bill forward but will be voted down by backbencher MPs?
You fundamentally do not understand how the Chinese government communicates.
They don't like to make disputes or threats public, and would always prefer to settle things privately.
So you'll never get a detailed retaliation publicly attributed to a Chinese government official.
But you can bet these are being delivered privately in person.
That applies to any of the East Asian Confucian countries like Japan, Korea, Taiwan, Singapore.
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And I'd say the unstated threat to the UK is very simple.
China will threaten to make Switzerland or Frankfurt the offshore RMB for Europe.
That means the end of London as a global financial centre.
The only country that dares sell arms to Taiwan is the USA.
There's a reason why France stopped selling arms to Taiwan for decades.
And I don't expect that arms deal to actually go through, because there are any number of French companies that will find themselves in difficulty.
Remember that China has an economy some 5x larger than France.
And you seem to be deluded in thinking that China has run out of options on Australia.
The Barley tariffs is just a warning shot.
Note that Australia has decided not to retaliate because it knows it will lose in any trade war with China.
