The Labour politician said big changes were needed to stop the move to a federal Europe but he stressed the importance of access to Europe's 450 million people.
In a TV interview he said David Cameron was increasingly giving the impression Britain could leave the EU.
Lord Prescott said: "They are going to say to him [Mr Cameron] 'What is the position of the European market?' Both the Japanese and the Chinese take the view that investment in Britain is good only if you have access to the European market."
He said any prospect of an exit would make potential investors reconsider long-term involvement in the UK.
Asked if Britain was cap-in-hand to China, he said: "Absolutely", adding: "The private sector is not able to produce the investments necessary to get real economic growth so in desperation he [Mr Cameron] has been forced to turn to China and say 'Come and give me the investment.'"