A US Congressional panel says China has stepped up computer espionage against the United States government and American businesses.
In its annual report to Congress, the US-China Economic and Security Review Commission said China is gaining increasing access to sensitive information from US computer networks.
It said China was aggressively pursuing cyber-warfare capabilities to gain an advantage over the US in any conflict.
The BBC reports there is no comment so far from China on the report.
The commission was set up by Congress in 2000 to advise, investigate and report on US-China issues.
Its latest report said the US government and economy are critically vulnerable to cyber-space attack since both depended heavily on computers and the internet.
The panel of six Democrats and six Republicans said China would continue to target the US using cyberspace as it was cheaper than traditional espionage activities.
Chairman Larry Wortzel said China is stealing vast amounts of sensitive information from US computer networks.
The panel recommended that federal funds be prodivdied for US government programmes - including those run by the military and homeland security - that would monitor and protect sensitive information held on computer networks.